The S&P 500 climbed more than 28% in 2021. That came on top of strong gains in recent years as well. While the pandemic crushed many companies and inflation is starting to cause big problems for some, the overall market continues to march higher. That said, big pieces of the market such as cloud computing and innovation stocks are in a terrible downtrend.
With stocks in general at high valuations compared to historical averages and the growth names taking on water, where should investors look to start 2022? Fortunately, there are still several quality stocks selling at reasonable prices with a favorable outlook for the year. Here are five of the best stocks to buy for January 2022:
— Molson Coors Brewing Co. (ticker: TAP)
— Goldman Sachs Group Inc. (GS)
— Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
— Zimmer Biomet Holdings Inc. (ZBH)
— Unilever PLC (UL)
Molson Coors Brewing Co. (TAP)
Molson Coors is a large North American brewing company. The company is most known for its venerable brands including Molson, Coors and Carling. In recent years, the firm has evolved to stay relevant, adding craft labels such as Blue Moon while moving heavily into emerging categories such as hard seltzer. Like other beer firms, Molson Coors had a couple of challenging years as the pandemic greatly curtailed on-premise beer consumption at bars and restaurants. However, Molson Coors is turning the corner now.
The company is back to positive revenue growth and analysts see earnings growth on the horizon once again as well. And with the stock already selling for less than 12 times earnings, shares are a bargain at this level even before factoring in more future growth. Morningstar agrees that Molson Coors is a compelling opportunity in 2022. Analyst Jaime Katz sees fair value at $66 per share, which is a more than 30% upside from TAP’s current share price of about $50.
Goldman Sachs Group Inc. (GS)
Goldman Sachs surprised many folks with last year’s 45% rally, which pushed shares to new all-time highs. Even so, the stock remains a surprising value after that, earning it a spot among the best stocks to buy for January. The bank is currently selling for less than seven times trailing earnings thanks to an absolute explosion in its operating income.
Goldman is seeing robust activity across numerous lines of business including wealth management, initial public offering underwriting and mergers and acquisitions advisory services. In other words, with global financial markets booming, Goldman’s investment banking services are in record demand. If equity markets slump, perhaps Goldman’s earnings will dip considerably in 2022 or 2023. However, if not, the stock could put up another big year given just how much the company is earning. For full-year 2021, after all, Goldman is expected to earn more than $60 per share, which is simply tremendous for a roughly $400 stock.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is one of the world’s leading chip and integrated circuit producers. According to Gartner, it had nearly 60% worldwide market share in 2020, making it a strategic asset on a global scale. And given the semiconductor shortage and global supply chain issues, companies like Taiwan Semiconductor have enjoyed strong pricing for their products. Despite that, TSM stock was only up around 10% over the past year, held back by geopolitical concerns among other factors. That pause gives investors an attractive entry point, making TSM one of the best stocks to buy to start 2022.
Taiwan Semiconductor is well positioned to benefit from long-term trends such as the “internet of things,” which is putting more and more chips into everyday devices. Morningstar sees TSM stock trading at a 10% discount to fair value to start 2022, and the firm projects 14% per year top-line compounded growth over the next five years, giving investors plenty to look forward to.
Zimmer Biomet Holdings Inc. (ZBH)
Zimmer Biomet is the dominant medical devices company in the joint replacement field. Zimmer Biomet gives investors a clear way to invest in demographics. The twin forces of the rapid aging of the population and high obesity rates are leading to a tremendous demand for these types of medical devices. Despite the strong long-term outlook, Zimmer shares got clocked in 2021 on COVID-19 concerns. Namely, when hospitals have to hold beds for potential patients, it forces them to delay elective surgeries.
The medical device sector sold off sharply in 2020 due to these issues and slumped again late last year thanks to the omicron variant. Once that passes, however, device makers such as Zimmer Biomet should see a swift rebound. Morningstar’s Debbie Wang sees fair value for Zimmer shares at $192, which is a tremendous upside from the current $131 stock price.
Unilever PLC (UL)
Growth stocks remain shaky to start 2022, leading some investors to look for defensive names. Unilever is a great pick in this category. Unilever is a leader in soups, sauces, teas, and hair and body care products. Companies such as Unilever enjoyed a strong sales year in 2020 thanks to people stocking up their pantries during the pandemic. Sales momentum slowed in 2021 though, and rising inflation took a bite out of profit margins as well.
But with price increases starting to kick in, 2022 is shaping up to be better for the food industry. For Unilever specifically, analysts see nearly 10% earnings growth for the year, which will leave shares at less than 18 times forward earnings. That, plus a juicy 3.8% dividend yield makes this is a rock-solid play for investors looking for a safe haven trade to start 2022.
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