There seems to be a common misconception that you need tens of thousands of dollars to become an investor, but that's not true in the slightest. Stock market returns compound over time, so getting started is the most important part of investing. But where to begin?
There are deals on stocks all over the market, including within the multi-trillion dollar healthcare industry. Investors can grab a slice of these three stocks with just a $300 investment to get started.
1. Johnson & Johnson
Healthcare conglomerate Johnson & Johnson (NYSE: JNJ) is the textbook example of a blue chip stock; its business spans virtually every area within the industry, including consumer products like Tylenol and Band-Aids, medical devices, and pharmaceutical drugs. It sells its products worldwide and has done more than $90 billion in revenue over the past 12 months.
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The company's most notable trait for investors is likely its stellar dividend track record; Johnson & Johnson is a Dividend King that's raised its payout for the past 59 years. It also is one of only two companies with a AAA credit rating, illustrating just how reliable it's been for shareholders. Investors can get a dividend that yields 2.5% today, and the business has been growing earnings per share an average of 8% annually over the past decade.
Johnson & Johnson is undergoing some changes, though. It's spinning off its consumer products business as a new company. Doing this should help shield the rest of the company from ongoing litigation surrounding its talcum-based powder products. Investors will need to see how this plays out, but Johnson & Johnson's robust financials should comfort investors. The stock trades at a price-to-earnings ratio of 21, which is near its lowest in three years.
2. Invitae
It's still a young industry, but genetics could play a bigger role in medicine moving forward. Genetic testing company Invitae (NYSE: NVTA) has been at the forefront of the industry since it went public back in 2015. The company is one of the largest genetic testing companies globally and steadily accumulates genetic data from the patients it tests. The company hopes to make it possible for healthcare to be personalized to patients' genetic makeup one day.
Invitae's a growing company; revenue increased 65% year over year to $460 million in 2021. However, Invitae has and continues to operate at significant losses, burning roughly 185% of its revenue as cash in 2021. The company's struggled with this for years, causing the company to dilute shareholders by issuing new shares to raise money. It currently has about $1 billion in cash on hand, which should buy the company some time, but another fundraise could happen if Invitae's losses continue.
The company's losses make it a more risky investment, but the share price has also been pushed lower by the market. The stock is now down almost 80% over the past year, pricing it at a P/S ratio of 4, near its lowest in five years. The company's market cap is just $2 billion, so Invitae could produce significant returns if it can keep growing and become profitable over time.
3. Merck
Pharmaceuticals play a crucial role in healthcare, and Merck (NYSE: MRK) is one of the world's largest drug companies. It generated nearly $49 billion in worldwide sales in 2021. Merck has developed an anti-viral oral pill to treat COVID-19 that should be a big contributor to the business this year. Management is expecting total sales to grow 15% to 18% in 2022, with contributions from its COVID-19 pill ranging between $5 billion and $6 billion.
The company also closed its $11.5 billion acquisition of Acceleron Pharma in November, which gives Merck ownership of Acceleron's late-stage potential blockbuster drug to treat pulmonary arterial hypertension (PAH). Merck expects the drug to produce multi-billion dollar annual revenue when it launches, expected between 2024 and 2025.
This is part of Merck's efforts to prepare for losing patent exclusivity on its largest seller, Keytruda, in 2028. Keytruda was responsible for just over $17 billion in sales in 2021, or 34% of Merck's total revenue. The stock trades at a P/E ratio of just 15, which could be partially explained by investor anxiety over the looming loss of Keytruda's exclusivity.
However, the overall growth of the company and future contributions from Acceleron's potential blockbuster drug could make the current uncertainty around the stock a great buying opportunity.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool owns and recommends Invitae. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
