Forget Nvidia: It would be smarter to invest $300 in these 3 unstoppable stocks now

One of the best things about investing your money on Wall Street is that most online brokers have removed hurdles that once prevented retail investors from doing so. Minimum deposit requirements and commission fees for trading common stocks on the major U.S. exchanges are largely a thing of the past.

For the average investor, this means that virtually any amount – even $300 – can be the perfect amount for the stock market.

Image source: Getty Images.

It may sound tempting to invest $300 in the hottest stock on Wall Street, but the king of artificial intelligence (AI) NVIDIA (NVDA 2.18%)there are three unstoppable stocks that are much smarter buys right now.

Four reasons why investors can safely do without Nvidia

Although Nvidia's graphics processing units (GPUs) for artificial intelligence absolutely dominate in compute-intensive data centers, there are a number of reasons to believe that the company's stock has peaked and will underperform in the coming years.

For example, there hasn't been a breakthrough innovation in at least three decades that wasn't thwarted by a bubble burst early on. Invariably, investors overestimate the acceptance and utility of new technologies and innovations, ultimately causing real-world results to fall short of celestial expectations. If artificial intelligence goes down this path, no company will suffer more than Nvidia.

Another headwind for Nvidia is increasing competition. While it's well documented that other chipmakers are ramping up production and/or launching AI GPUs for AI-accelerated data centers, investors are likely overlooking the prospect of internal competition. All four of Nvidia's largest customers by net revenue are developing their own AI GPUs, which will undoubtedly limit future orders for the company's hardware.

Insiders also don't give investors a reason to buy. Nvidia's recently unveiled $50 billion buyback program, or as I call it, the “dummy campaign,” doesn't hide the fact that it's been 45 months since an insider bought a single share on the open market.

Finally, Nvidia's valuation is not quite as enticing as it might seem. The company's shares are valued at an ugly 30 times trailing-twelve-month (TTM) sales and briefly reached a TTM price-to-sales ratio of over 40 in June.

Forget Nvidia and consider investing $300 in the following three unstoppable stocks now.

visa

The first sensational stock that you can buy now for $300 and that has all the tools needed to deliver above-average returns to Nvidia in the coming years is the leading payment processor visa (V -1.16%).

Although signs of recession are always present, Visa benefits enormously from the non-linear nature of the business cycle. Although recessions are both normal and inevitable, historically they are short-lived. Only three of the twelve recessions in the United States since the end of World War II lasted a full year.

In comparison, most growth phases last many years, if not a decade. Visa benefits from long periods of growth and the long-term expansion of consumer and corporate spending.

At the same time, Visa is well protected from economic downturns thanks to its targeted loan avoidance. Although some of its competitors act as lenders And Visa is a payment processor and focuses solely on processing payments. Because the company does not issue loans, it does not need to set aside capital for the inevitable periods when the U.S. economy weakens. This gives Visa more financial flexibility than its competitors and helps the company recover very quickly from recessions.

Visa also has incredible opportunities in foreign markets. Cross-border payment volumes grew 14% in constant currency in Visa's most recent quarter, following a consistent trend of sustained double-digit growth in cross-border payment volumes. Many of the world's fastest-growing emerging markets are chronically underbanked, giving Visa a clear opportunity to sustain double-digit annual earnings growth through the end of this decade, if not beyond.

Image source: Walt Disney.

Disney

A second unstoppable stock that can outperform Nvidia in the return column and is currently an excellent buy at $300 is the media giant Disney (DIS 0.24%).

Few companies have been hit as hard by the COVID-19 pandemic as Disney. The closure of theme parks, limited studio production, and the closure of individual cinemas have severely impacted the company's results. But with the reopening of the Chinese economy and the increase in studio production, Disney is shining again.

Perhaps the best aspect of Disney's business model is that it cannot be copied. While there is no shortage of movies and series to watch and theme parks to visit, no other company offers the history, depth of interaction, characters or storytelling ability that Disney brings. This alone ensures that Walt Disney will continue to generate predictable cash flow from its various business segments.

Another reason investors can be happy is Disney's progress in the direct-to-consumer (DTC) segment. After years of significant losses, Disney has now turned an operating profit from its DTC segment for the first time. Because Disney is an irreplaceable media company, the company was able to increase subscription prices across all of its divisions and bring its DTC segment into profitability a full quarter ahead of schedule.

The House of Mouse is also historically cheap. Its price-to-earnings ratio of 18 represents a 31% discount to its average forward earnings multiple over the past half-decade. In addition, Disney should be able to deliver sustainable double-digit earnings growth as its DTC segment and studio begin to run wild.

PubMatic

The third unstoppable stock that makes for a smarter buy than Nvidia at $300 currently is small-cap adtech company PubMatic (PUBM -1.11%).

PubMatic is perfectly positioned to benefit from the rise of digital advertising. Although advertising is highly cyclical and companies are not afraid to cut their marketing budgets at the first sign of trouble, the non-linearity of economic cycles mentioned above benefits advertising-driven companies. Long-term investors should benefit from shares in companies whose advertising spend increases over time.

One of the main reasons for PubMatic's success is the management team's decision to design and develop its own cloud-based programmatic advertising platform. While it would have been easy for PubMatic to rely on a third-party provider, the decision to build its own cloud-based infrastructure is likely to result in significantly higher operating margins as revenue increases.

As mentioned above, PubMatic has focused on the fastest-growing areas of the advertising space. Specifically, it is a sell-side platform that aims to sell digital display space for advertisers in mobile, video and connected TV (CTV). All three of these segments can sustain double-digit annual growth in ad spend for the foreseeable future, with CTV ad spend growing the fastest.

Finally, PubMatic has a strong balance sheet that gives the company plenty of financial flexibility. The company ended June with $165.6 million in cash and cash equivalents, no debt, and has repurchased approximately $100 million of common stock. In addition, the company is generating positive operating cash flow for the tenth consecutive year.