$2,000 may not seem like much to invest, but it's enough to make a difference if you pick the right stocks and have a long enough investment time horizon.
After all, thanks to the magic of compounding, a $2,000 investment would turn into more than $10,000 in 20 years, just by tracking with the historical 9% annual return of the S&P 500.
If you'd like to beat that return, keep reading to see two stocks you can scoop up today at a discount.
Image source: Getty Images.
1. PayPal
PayPal (PYPL 0.51%) was once a market darling, surging in its early history and during the pandemic. However, the economic reopening has brought a slowdown in digital spending, which has cooled off growth at digital payments companies like PayPal.
As a result, the stock is now down 81% from its pandemic-era peak, but there are signs that PayPal is starting to turn the corner. Revenue in the third quarter accelerated modestly year over year to 8%, and adjusted earnings per share jumped 20% to $1.30. Total payment volume was up 15% to $387.7 billion, showing that demand for its services is still strong.
NASDAQ: PYPL
Key Data Points
The company has also been overhauling its management team, bringing in Alex Chriss as its new CEO and Jamie Miller as its new CFO. Chriss aims to cut costs and renew the focus on the core business instead of acquisitions. The company has also been aggressively buying back stock to take advantage of the discounted stock price, repurchasing $1.4 billion worth of shares in the third quarter and $5.4 billion over the past four quarters, reducing shares outstanding by more than 10%.
Reports from Shopify and other peers indicated that the holiday shopping season is off to a strong start after a big Black Friday, setting PayPal up to benefit from a recovery in online shopping.
Finally, the stock's valuation is hard to pass up, as it trades at less than 12 based on this year's forward price-to-earnings ratio. At that price, PayPal needs only a modest improvement in growth to deliver results for investors.
2. Ford Motor Company
The past few years have been tough on legacy automakers, which are perceived as falling behind electric-vehicle (EV) makers such as Tesla. Ford Motor Company (F +4.06%) stock, for example, is now down 57% from its peak during the pandemic.
However, the reality is that Ford continues to crank out billions in profits even while introducing new EV models and reinventing itself to stay current. Even after it took a $1.7 billion hit from the United Auto Workers strike, the carmaker still expects an operating profit of $10 billion to $10.5 billion, meaning the stock trades at just 4 times its expected operating profit for the year.
NYSE: F
Key Data Points
While sales growth in EVs is cooling off across the board, Ford continues to deliver stellar results in its core Ford Blue combustion-vehicle business. Revenue from that division rose 7% year over year to $25.6 billion in the third quarter, and operating profit jumped 17% to $1.7 billion.
The Ford F-150 remains the best-selling vehicle in the U.S., and the company also saw a 40% growth in hybrid vehicles year over year in the third quarter, including a 47% increase in Ford F-150 hybrid volumes.
Ford also offers a dividend that currently yields 5.7%, and the company has room to raise the quarterly payout.
The automaker also said it would postpone $12 billion in spending on EVs because of weak demand. However, that should help improve near-term profitability. If the car market is slower to shift to EVs than expected, that should favor the legacy automakers.
Based on its adjusted earnings, the stock trades at a price-to-earnings ratio of less than 5, which looks like a great price to pay for this solid profit machine.
