These are 10 of the top stocks to invest in for 2022.
Little did investors know at the end of 2021 — a year replete with crypto mania, meme stock frenzies and new trillion-dollar companies — that the beginning of 2022 would usher in a more subdued vibe in the stock market. Stocks fell off a cliff in January, their worst month since the depths of the pandemic in March 2020, as a rotation from growth to value stocks began and Wall Street nervously eyed stubbornly elevated inflation numbers and increasingly inevitable interest rate hikes. While this environment has been great for commodities stocks, it hasn’t panned out for technology stocks, with investors fleeing even some of the largest and most established companies in the world to start the year. With that in mind, here’s a look at U.S. News’ list of 10 of the best stocks to buy for 2022, and how they’ve each fared so far. As an equal-weighted portfolio, these picks are down 5% to date, besting the S&P 500’s 6.1% decline.
Alphabet Inc. (ticker: GOOG, GOOGL)
Google’s parent company, Alphabet, entered 2022 as one of the most reasonably priced trillion-dollar names, trading for the same price-earnings ratio as the S&P 500 as a whole and at a slight discount to the even more enormous Apple Inc. (AAPL). Since being picked as one of the best stocks to buy for 2022, Alphabet reported a fabulous fourth quarter in which both revenue and earnings blew past expectations, as the top line rose 32%. One notable standout was YouTube, which posted $8.6 billion in revenue in the last three months of 2021 alone. To put that number in context, that’s a more dominant showing than Netflix Inc. (NFLX), which posted revenue of $7.7 billion in the same period. While shares surged more than 7% on the great quarter and news of a 20-for-1 stock split this summer, the stock is still down in 2022 due to the broader market sell-off that preceded.
Year-to-date return (through Feb. 16): -4.9%
Medifast Inc. (MED)
Picked late last year for its compelling valuation, solid dividend and long track record of growth, shares of this weight-loss products company looked like a “growth at a reasonable price” opportunity. Yet after slumping a bit to start the new year, MED stock, which was picked as one of the 10 best stocks in 2020 and went on to return 86% that year, is starting to look like an out-and-out value stock. The company trades for about 14 times earnings despite analyst expectations for 17% compound annual earnings growth over the next five years. It also pays a 3% dividend and boasts an immaculate balance sheet, with plenty of room to lever up and supercharge growth should it so desire. In theory, Medifast also stands to benefit from the shift from growth to value stocks.
YTD return: -8.7%
ASML Holding NV (ASML)
Dutch technology giant ASML is a monopoly. But even monopolies aren’t immune from downtrends in market sentiment, as evidenced by the stock’s uninspiring year-to-date performance. But the facts surrounding ASML have not changed: The company’s most compelling selling point is its global monopoly on extreme ultraviolet, or EUV, lithography machines, which are now a vital part of the semiconductor production process, especially for chipmakers producing ever-smaller microchips that are coming down to sizes of 5 nanometers. Extreme precision technology is needed to imprint patterns on chips of that size, and at high levels, EUVs are the only feasible option. These massive machines are coveted among a global semiconductor shortage, with each of ASML’s proverbial golden geese selling for about $150 million. ASML is guiding for 20% growth in 2022 on the heels of a strong backlog.
YTD return:-16.6%
EOG Resources Inc. (EOG)
Entering 2022, it was abundantly clear that inflation was an issue. The most recent reading of that metric at the time these picks were made clocked in at 6.8% year over year. Since then, inflation has increased, with the consumer price index advancing by 7.5% from January 2021 to January 2022. EOG Resources, a U.S. oil and natural gas producer, was picked as an inflation play, since soaring commodities prices are a predictable corollary of rising prices throughout the economy. This logic has played out perfectly year to date, with EOG being the best-performing name among the best stocks to buy for 2022. Oil prices are already up more than 20% in the early innings of the year, and EOG shares have followed suit. A Russian invasion of Ukraine — although devastating to geopolitical stability — would likely send energy prices even higher.
YTD return: +26.7%
Lowe’s Cos. Inc. (LOW)
Everyone loves best-in-class names, but sometimes it pays to invest in companies playing second fiddle to larger competitors, as Lowe’s does to rival Home Depot Inc. (HD). Although worth about $150 billion, Lowe’s is less than half Home Depot’s size, leaving the Mooresville, North Carolina-based home improvement retailer ample room for expansion. The stock, even after a remarkable rally in 2021 as consumers continued spending on their pandemic abodes and the housing market surged higher, trades for less than 20 times earnings. That’s a discount to Home Depot’s 23.6 multiple and a more than 20% discount to the S&P 500’s 25.4 price-earnings ratio. With ample time left in the year, Lowe’s still looks like a high-quality stock to buy at today’s fair prices.
YTD return:-11.9%
Microsoft Corp. (MSFT)
Microsoft is similar to ASML in that it has something resembling a monopoly. Unlike ASML, Microsoft actually enjoys multiple near-monopolies by way of Microsoft Windows in operating systems and productivity software via Office and Office 365. Sure, fellow best-stocks nominee Alphabet has its own competing productivity software via the likes of Google Docs (Word competitor), Google Sheets (Excel competitor) and Google Slides (PowerPoint competitor), among others. But what does it say that these services have been free for over a decade and Microsoft has only grown larger? The $2.3 trillion Microsoft is also increasingly driven by its high-margin cloud computing division Azure, which saw revenue soar 46% last quarter. Microsoft’s recently proposed $69 billion acquisition of video game company Activision Blizzard Inc. (ATVI), if approved, would give it a huge advantage over rival Sony Group Corp. (SONY) in yet another large and growing industry.
YTD return:-10.9%
Upstart Holdings Inc. (UPST)
One of the worst-performing stocks on the list until mid-February, this artificial intelligence innovator in the credit score industry is living up to its billing as one of the more volatile names in this group after fourth-quarter results sent shares up more than 35% in a single day. An out-and-out growth stock, UPST began the year getting hammered by a risk-off attitude in markets, but when its fourth-quarter results revealed revenue jumped 252%, investors began flocking back to the stock. Unlike many growth stocks, Upstart is profitable, and earnings per share of 89 cents also handily exceeded analyst expectations for 51 cents per share. The loan platform’s uncanny ability to gauge risk among borrowers makes it a challenger to traditional credit score companies like Fair Isaac Corp. (FICO), and with the company just entering the massive auto loan origination market, Upstart, which posted $849 million in 2021 revenue, still has a major growth ramp to look forward to.
YTD return:-2.2%
Visa Inc. (V)
More often than not, it’s a good idea to pick up shares of high-quality, dominant companies when the market is down on them. Entering 2022, Visa was trading where it was in February 2020, despite payments volume being above 2019 levels and a 17% hike to its dividend. The market’s catching on to Visa’s appeal, and after impressive fiscal first-quarter earnings, it’s outperforming the market in 2022. The company raised its fiscal 2022 revenue growth guidance, largely due to stronger cross-border spending, where Visa earns higher fees on transactions. In fact, even with omicron to contend with, Visa just upped its guidance on its cross-border travel business by 10 percentage points, expecting to end the fiscal year at 90% of pre-pandemic levels.
YTD return:+5.8%
Grupo Aeroportuario del Sureste SAB de CV (ASR)
Regardless of your interpretation of the Robert Frost poem, occasionally it pays to take the road less traveled, and Mexican airport operator Grupo Aeroportuario del Sureste is assuredly off the beaten path for most U.S. investors. This owner of the Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia, airports offers both geographical diversification and a break from large-cap stocks, with a $6.8 billion valuation. Despite the pandemic and the recent omicron surge, passenger traffic at all airports in January 2022 was actually 3.3% higher than January 2019 levels. ASR’s Colombia locations are especially hot these days, with passenger traffic up 25.7% in that country. With shares up year to date and the stock paying a 1.8% dividend, taking ASR’s route has made all the difference.
YTD return:+8.5%
Meta Platforms Inc. (FB)
Last and easily least by 2022 performance is the company formerly known as Facebook, which has stumbled, to say the least, since rebranding itself as Meta Platforms in an effort to reposition the company as a metaverse play. The company’s fourth-quarter earnings call brought a spate of bad news, not least of which was the projection that Apple’s privacy changes to its iOS will reduce 2022 revenue by about $10 billion. The social media giant’s effort to pivot is also proving to be expensive, as the company released financials for its metaverse division, ironically named Reality Labs, for the first time, revealing a loss of more than $10 billion in 2021. This flood of bad news took more than 20% off FB’s market cap in a single day, but there’s good news for investors going forward: The company remains dominant in digital advertising, and the stock trades for less than 17 times forward earnings, so shares seem oversold and primed for a bounce.
YTD return:-35.6%
The best stocks to buy for 2022:
— Alphabet Inc. (GOOG, GOOGL)
— 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)
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10 of the Best Stocks to Buy for 2022 originally appeared on usnews.com
Update 02/17/22: This story was previously published and has been updated with new information.
