10 of the top stocks to invest in for 2022:
Entering 2022, there’s a lot to keep tabs on as an investor. Domestically, a tight labor market, rising inflation and the likelihood of an interest rate hike from the Federal Reserve all go down as factors to reckon with. Globally, supply chain bottlenecks and an ongoing effort to battle COVID-19 and its many variants loom large. Economists are guardedly bullish on the new year, however, generally guiding for global economic growth between 4.5% and 5%. While some portfolios may benefit from rebalancing in light of these macroeconomic trends, it’s still a stock picker’s market, and a portfolio of financially sound, growing businesses is a winning formula in the long run. With that in mind, here are 10 of the best stocks to buy for 2022.
Alphabet Inc. (ticker: GOOG, GOOGL)
As a top-of-the-line large-cap growth stock, GOOGL trades for a price-earnings ratio virtually identical to the broader S&P 500 index, just under 29. Analysts expect GOOGL earnings to rise 24% annually over the next five years, in contrast to the 15% growth expected for Apple Inc. (AAPL), tech‘s belle of the ball, which trades at 31 times earnings. Alphabet’s core business of online advertising remains incredibly strong; YouTube revenue continues to surge, up more than 43% in the most recent quarter, and the Google Cloud business is on the rise. Although cloud operations aren’t profitable — on $4.99 billion of revenue last quarter, up 45% year over year, Alphabet logged a $644 million operating loss — margins are improving, and a swing to profitability represents a big opportunity for investors. The optionality of Alphabet’s long-unprofitable “other bets” division, where it swings for the fences on big ideas, is also attractive. Plus, if leadership gets fed up with other bets, discontinuing the division would’ve netted another $1.3 billion in operating profits in the last quarter alone.
Medifast Inc. (MED)
Next on the list of best stocks to buy for 2022 is Medifast, a multilevel marketing company that makes, distributes and sells foods intended for weight loss. A repeat pick from the 2020 list, when shares returned a cool 86%, Medifast once again finds itself woefully undervalued after essentially trading sideways in 2021, despite an enviable year of growth that saw revenue up 52% last quarter. What you might term a “growth at a reasonable price” opportunity, Medifast shares trade for less than 15 times earnings, while analysts expect earnings growth of 20% annually over the next five years. With no debt, a sustainable 2.9% dividend, and a company insider recently buying nearly $1 million worth of MED, there’s little to dislike about this overlooked $2.3 billion growth and income stock.
ASML Holding NV (ASML)
Billionaire investor Peter Thiel, one of the founders of PayPal Holdings Inc. (PYPL) and an early investor in the company formerly known as Facebook Inc. (FB) famously despises competition. In this view, what businesses and investors should strive for is something approaching a monopoly. And ASML, a Netherlands-based technology company now worth about $320 billion, has an immensely valuable one. ASML is the world’s only producer of extreme ultraviolet, or EUV, lithography machines, which are needed by semiconductor foundries and large chipmakers to produce the most powerful chips in the world. At the highest levels, ASML is the company keeping the trend of ever smaller, denser and more power-efficient chips alive. The barriers to entry are extremely high — ASML spent decades researching this technology, and each EUV lithography machine costs about $150 million and is roughly the size of a bus — and demand remains high as the global chip shortage continues into 2022.
EOG Resources Inc. (EOG)
It would be a dereliction of duty for anyone putting together a list of the best stocks to buy for 2022 to omit a pick that would benefit from inflation. Enter EOG, a U.S.-based oil and natural gas producer that is large enough to weather storms at more than $50 billion. The company pays a sustainable 1.8% dividend and trades for less than 9 times forward earnings. EOG trades at a 33% discount to its peak in October 2018, despite the fact that oil prices were virtually identical to what they are today. With November’s 6.8% inflation reading in mind — the highest in almost 40 years — investors should expect commodities like oil to be primed for further gains. Known as an efficient operator, the shale-heavy EOG has proven out its ability to rise with energy prices, surging 82% in 2021 alongside a 50% rally in oil.
Lowe’s Cos. Inc. (LOW)
Next among the best stocks to buy for 2022 is Lowe’s, a repeat pick from 2021. The housing shortage, red-hot real estate market and pandemic should continue to be bullish catalysts for the home improvement space in the coming year as people remodel, add on and otherwise fix up their homes to accommodate these strange times. LOW stock, which has advanced more than 60% in 2021, nonetheless still lives up to its ticker symbol when compared to larger rival Home Depot Inc. (HD), which trades at roughly 28 times earnings, compared with about 23 times earnings for LOW. While sales growth likely won’t be much to write home about — revenue rose less than 3% last quarter as it lapped 2020’s pandemic-fueled growth — it is margins where the opportunity lies. The somewhat lower net margins than its larger peer mean each incremental percentage-point improvement will have a greater impact on earnings growth. Buybacks evidence the company’s belief in its attractive valuation; the outstanding share count declined 8.2% year over year.
Microsoft Corp. (MSFT)
Microsoft, for whatever reason, was done a major disservice when left out of every tech investor’s favorite acronym: FAANG. Long dominant in PC software — the company was ordered to split up in 2000 due to antitrust violations before winning an appeal and eventually settling with the federal government — Microsoft has since deftly avoided the brunt of the government’s renewed anti-Big Tech sentiment. A fantastic business, modern-day Microsoft is cloud-centric, with almost all aspects of its business aiming to bolster its Azure cloud computing platform, the high-margin, fast-growing service that’s the second-largest cloud provider, next to only AWS. Its monopoly-esque foothold in operating systems (Windows) and productivity software (Office and Office 365) crank out regular cash flows that it can reinvest in the cloud. Segments like LinkedIn (up 42% last quarter), Xbox, Microsoft Surface and Salesforce.com (CRM) competitor Microsoft Dynamics are delectable cherries on top. Don’t be surprised if the $2.6 trillion Microsoft breezes past the $3 trillion mark in 2022.
Upstart Holdings Inc. (UPST)
This swing-for-the-fences pick is not for the faint of heart but holds great promise in the long run. Upstart is an artificial-intelligence-driven innovator in the credit-score industry long dominated by the likes of Fair Isaac Corp.’s (FICO) FICO score. Upstart’s claims are remarkable: It asserts that lenders using its service see 75% fewer loan defaults. Behavioral evidence also points to the utility of Upstart’s technology, with bank partnerships going from 10 at the time of its December 2020 IPO to 31 by the time of its November earnings call. Upstart’s addressable market is also expanding rapidly. What began with personal loans is now expanding into the much larger auto loan market, with bigger fish like mortgages likely to follow in time. With the stock price at 22 times sales, there’s a good amount of growth built in, but Upstart is already profitable — a rarity for a young growth stock.
Visa Inc. (V)
Credit card giant Visa rarely offers enticing entry points, trading at a premium to the rest of the market due to its impressive track record, high margins, consistency and incredible competitive advantages. But after slipping slightly in 2021, shares are totally flat since February 2020 highs. This is despite payments volume in its most recent quarter, the fiscal fourth quarter, rising from 2019 pre-pandemic levels and the company confidently announcing a 17% hike to its quarterly cash dividend. Some scary recent headlines are to blame, in part, for the opportunity with Visa, as Amazon.com Inc. (AMZN) is suddenly planning to ban U.K.-issued Visa cards on its site due to high fees. Visa’s CEO has said he expects that conflict to be resolved. A gradual return to normalcy and increased global travel will also be undoubtedly bullish for Visa, which makes higher fees on international spending.
Grupo Aeroportuario del Sureste SAB de CV (ASR)
Time for something a little outside the box: The penultimate pick among the best stocks to buy is Mexican airport operator Grupo Aeroportuario del Sureste. Unlike airlines themselves, operators just have to keep the airports running — and then sit back and collect their cut. The company, which owns the Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia, airports, in November reported that traffic at all its airports was already 7.2% higher than in November 2019. Although omicron and future coronavirus variants may present threats, shares were little-phased by delta in 2021, and the company churned out profits as Mexico did relatively little to combat the new variants. In a nutshell, ASR is an international mid-cap and an attractively priced dividend stock, yielding 2% and trading for less than 17 times earnings. If you’re a believer in a gradual reopening and steady return to normal consumer behavior, expect travel to bounce back and ASR to benefit.
Meta Platforms Inc. (FB)
Over the long term, economic conditions may fluctuate, geopolitical crises may emerge, an unforeseen pandemic may rear its ugly head … but one thing remains constant: human nature. Meta Platforms, the company formerly known as Facebook, is a wager on the ego. An incredible 3.58 billion people use one of the company’s services — which include Facebook, Instagram, WhatsApp and Messenger — on a monthly basis, which breaks out to about 50% of the global population or 75% of global internet users. Only two of those platforms, Facebook and Instagram, are meaningfully monetized, with monetization of WhatsApp and Messenger still representing a huge opportunity. And the elephant in the room is Facebook’s pivot to betting on the metaverse, which it will invest $10 billion into over the next year. Although it’s virtually certain to take years to start paying dividends, at just 23 times earnings, Meta Platforms arguably has the best value-to-growth proposition of the FAANG stocks. Meanwhile, the ego isn’t going anywhere.
The best stocks to buy for 2022:
— Medifast Inc. (MED)
— ASML Holding NV (ASML)
— EOG Resources Inc. (EOG)
— Lowe’s Cos. Inc. (LOW)
— Microsoft Corp. (MSFT)
— Upstart Holdings Inc. (UPST)
— Visa Inc. (V)
— Grupo Aeroportuario del Sureste SAB de CV (ASR)
— Meta Platforms Inc. (FB)