The Best Stocks to Invest $1,000 In Right Now

Key Points

• Alibaba offers a cheap way to invest in artificial intelligence (AI), cloud computing, digital media, and e-commerce.

• UnitedHealth Group is a bargain after its steep sell-off.

• Vertex Pharmaceuticals has two new drugs on the market and a promising pipeline.

Forget the market sell-off experienced earlier this year. Stocks are hot again. But valuations have heated up as well -- perhaps too much, in many cases.

That doesn't mean you can't still find great stocks to buy, though. Here are my picks for the best stocks to invest $1,000 in right now (listed alphabetically).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Image source: Getty Images.

1. Alibaba Group

Want to invest in artificial intelligence (AI), cloud computing, digital media, and e-commerce in one fell swoop? You could buy shares of Amazon or Google parent Alphabet. I like both of those stocks, but there's another pick that's arguably even more attractive right now: Alibaba Group (NYSE: BABA).

Like Amazon and Alphabet, Alibaba is a leader in AI. The Chinese tech giant is investing roughly $53 billion in its AI initiatives over the next three years. It ranks as the largest cloud services provider in Asia and the fourth-largest in the world. Alibaba also operates two of the largest online marketplaces based on gross merchandise volume, Taobao and Tmall.

Perhaps the best thing about Alibaba is that its valuation doesn't reflect its growth potential. The stock trades at only 11.6 times forward earnings. Its price-to-earnings-to-growth (PEG) ratio, which is based on analysts' five-year earnings growth projections, is a low 0.9.

To be sure, the fact that Alibaba is based in China is a key factor behind its low valuation. However, the country's leaders undoubtedly want Alibaba to succeed. And they certainly don't want to fall behind in the AI race with the West. I think buying a share of Alibaba now for under $115 will pay off handsomely over the next few years.

2. UnitedHealth Group

You might think I'm crazy to include UnitedHealth Group (NYSE: UNH) on this list. Shares of the big healthcare company are down nearly 50% below the previous high. The company withdrew its full-year guidance in May, less than a month after lowering the outlook.

Pretty much everything that could go wrong for UnitedHealth, has. Its former CEO, Andrew Witty, unexpectedly stepped down. The Wall Street Journal reported that UnitedHealth Group was the subject of a criminal investigation by the U.S. Department of Justice. President Trump threatened to "eliminate" pharmacy benefits managers (PBMs). UnitedHealth Group's Optum Rx PBM generates nearly one-third of the company's total revenue.

Now, for some good news: UnitedHealth Group stock looks like a bargain after an overdone sell-off. Shares trade at 13.7 times forward earnings. That's the cheapest valuation for this blue chip stock in years.

I'm not worried about the underlying reason behind the company's guidance being pulled: higher-than-expected Medicare Advantage costs. That issue will be relatively easily resolved by higher premiums next year.

I like that UnitedHealth Group brought Stephen Hemsley back as CEO. And it's too early to panic over an alleged DOJ investigation. I'd bet that PBMs, including Optum Rx, will still be making plenty of money even after President Trump is long gone from the White House.

In my view, UnitedHealth Group's sell-off went too far. Buying this stock for around $326 looks like a steal for long-term investors.

3. Vertex Pharmaceuticals

Vertex Pharmaceuticals (NASDAQ: VRTX) doesn't face challenges from being based in China; its headquarters are in Massachusetts. The big drugmaker hasn't faced multiple rounds of bad news like UnitedHealth Group. I think the story is positive for Vertex from nearly every angle.

For one thing, Vertex continues to command a monopoly in treating the underlying cause of cystic fibrosis (CF). Its market dominance will undoubtedly be further solidified as the company's newest CF therapy, Alyftrek, picks up momentum.

Vertex has another new product on the market, non-opioid pain drug Journavx, that I expect will become a monster blockbuster. Journavx won U.S. regulatory approval in January 2025, becoming the first new class of pain drug approved in over two decades.

I like Vertex's pipeline prospects. The company could file for regulatory approvals of zimislecel, an islet cell therapy that holds the potential to cure severe type 1 diabetes, next year. Vertex also has two other experimental therapies in late-stage testing that target diseases that affect more patients than CF.

Vertex's valuation looks attractive, too. Although the biotech stock's forward earnings multiple of nearly 25 might not seem overly compelling, its PEG ratio is a super-low 0.58. With Vertex's share price hovering around $450, you'll be able to invest in this promising drugmaker along with Alibaba and UnitedHealth Group and still have some money left over from an initial $1,000.

Should you invest $1,000 in Alibaba Group right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Alphabet, Amazon, and Vertex Pharmaceuticals. The Motley Fool recommends Alibaba Group and UnitedHealth Group. The Motley Fool has a disclosure policy.