These are 10 of the top stocks to invest in for 2022.
It’s been a rough year for stocks. Through Aug. 17, the S&P 500 is down 10.3%, the Dow Jones Industrial Average is 6.5% lower and the tech-heavy Nasdaq is down 17.3%, all despite a recent rally. While a handful of factors are behind the lengthy slump, including the Russian invasion of Ukraine and back-to-back quarters of negative GDP growth, the largest obstacle has been inflation. Prices have consistently risen, month after month, at paces not seen in about 40 years. In response, a slow-moving Federal Reserve made a series of 75-basis-point interest rate hikes, the likes of which haven’t been seen in decades. Here’s a look at how U.S. News’ picks for the best stocks to buy for 2022, made in December 2021, are faring in this difficult environment.
EOG Resources Inc. (ticker: EOG)
Entering 2022, inflation had already emerged as a concern. The year-over-year increase in the consumer price index for November 2021 came in at an elevated 6.8%. U.S. oil and natural gas producer EOG Resources was picked largely as a hedge against the risk of ongoing inflation, and it hasn’t disappointed: In June, inflation hit 9.1%, its highest level since 1981. With energy prices emerging as one of inflation’s key drivers this year, EOG stock has benefited, and including dividends, the stock is up 33.6% in 2022 through Aug. 17, making it the top performer among the 10 picks. In August, EOG reported second-quarter net income that surged 146% year over year and declared a $1.50-per-share special dividend, its third special dividend announcement of the year.
Grupo Aeroportuario del Sureste SAB de CV (ASR)
This next name is a bit off the beaten path, but sometimes that’s where the best opportunities lie. Mexico-based airport operator Grupo Aeroportuario del Sureste was a thematic pick aimed at offering this group of stocks some geographic diversification while also wagering on the general urge of people to get back to traveling. So far, it’s worked out: Including dividends, the stock is up 12.2% in 2022 through Aug. 17. It’s no wonder why: Total passenger traffic in the second quarter jumped 19.2% from second-quarter traffic in 2019, which ASR uses as a pre-pandemic period for honest comparisons. With flagship airports in Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia, ASR is reaping the rewards of booming demand in Latin America. Compared to the same quarter last year, traffic is up 39.3%. ASR stock still trades at modest levels, boasting a 3.6% dividend yield and a forward price-to-earnings ratio of 17.5.
Visa Inc. (V)
Heightened global travel demand is a rising tide that has also lifted credit card giant Visa, which is handily outperforming the wider market in 2022 despite its share price more or less treading water. In Visa’s fiscal third quarter, cross-border travel volume broke through 2019 levels for the first time since the pandemic emerged. Cross-border volume is an important metric for Visa, which makes more per cross-border transaction than it does on domestic swipes. Cross-border volume rose 40% year over year last quarter, helping to drive a 19% jump in revenue and 33% surge in earnings per share. Through share buybacks and dividends, Visa also returned $3.3 billion to shareholders last quarter.
Microsoft Corp. (MSFT)
The most valuable company on this list, $2.2 trillion Big Tech behemoth Microsoft is next among the best stocks to buy for 2022. Despite its size, Microsoft continues to grow steadily, with revenue up 12% in the most recent quarter. Microsoft has a parade of strong digital products, including its ubiquitous Windows operating system and Microsoft Office productivity software. More recent endeavors over the last decade include its 2016 $26.2 billion acquisition of LinkedIn and the emergence of its cloud computing arm Azure, the latter of which saw 40% year-over-year revenue growth last quarter. Microsoft trades at a justified premium to the market at about 30 times earnings. Looking to grow its influence in the lucrative video game industry, Microsoft announced a $69 billion purchase of video game developer Activision Blizzard Inc. (ATVI) in January, which if approved would be its largest-ever acquisition and make Microsoft the world’s third-largest gaming company.
Another massive Big Tech firm on the list of 2022’s best stocks is Google’s $1.6 trillion parent company, Alphabet. Although shareholders are enduring a year-to-date decline in the stock price, the company itself continues to do well, with revenue rising 13% in the second quarter. CEO Sundar Pichai touted strength in Alphabet’s flagship search product, alongside growth in Google Cloud, as driving results. “The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes,” Pichai said. In mid-July, Alphabet underwent a 20-for-1 stock split, making the ownership of whole shares more financially accessible to the typical individual investor. As with some other decliners on this list, GOOGL has been disproportionately hit by being a tech stock in a rising-rate environment.
Lowe’s Cos. Inc. (LOW)
Lowe’s stock made the list of top stocks for 2022 as a play on the red-hot housing market. Some of the momentum in that market, however, hasn’t directly transferred to the pockets of LOW shareholders, as rapidly rising interest rates have begun to tamper enthusiasm. In the second quarter, Lowe’s reported sales of $27.5 billion, down slightly from $27.6 billion in the year-ago quarter. Management blamed a shortened spring selling season as one reason demand wasn’t robust. That said, adjusted earnings per share jumped 9.9% and exceeded analyst expectations, aided by an aggressive share buyback that saw Lowe’s repurchase $4 billion in stock. Long-term trends remain firmly in the favor of Lowe’s as millennials continue to become homeowners and the national housing shortage is a years-long problem in the making that could drive more renovation projects. LOW stock trades for 16 times forward earnings.
ASML Holding NV (ASML)
While richly valued Dutch semiconductor equipment maker ASML has been hit alongside other tech and growth stocks due to a more risk-off attitude and rising interest rates, its business remains an elite one unlike any other in the world. ASML enjoys a global monopoly on extreme ultraviolet, or EUV, lithography machines — extremely bulky high-tech machines that etch ever-smaller patterns on wafers that go into semiconductors. This niche, precision industry has allowed ASML to pull in gross margins of 49%, a number even Apple Inc. (AAPL) would envy. By virtue of being a cash cow, ASML has been able to boost its dividend payout more than fourfold in the last five years, all while keeping it sustainable — the payout ratio is still less than 40%. The company expects sales to increase 10% this year, although that number is artificially depressed due to some delayed revenue recognition that will be pushed out to 2023.
Medifast Inc. (MED)
At $1.5 billion, Medifast is the smallest company on the best stocks to buy list. Medifast is a weight-loss management and multilevel-marketing company with tens of thousands of salespeople, known as coaches, pushing its meal plans and products. MED stock should be considered an out-and-out value play at current levels, paying a 4.6% dividend and trading at just over 10 times forward earnings. Medifast is consistently profitable and uses just 45% of earnings to pay its dividend, even after raising its payout by 15% earlier this year. While inflation and consumer sentiment have weighed on results this year, the company was still able to grow revenue by 15% last quarter.
Meta Platforms Inc. (META)
Formerly known as Facebook, Meta Platforms is another Big Tech name whose shares have been struggling under the weight of rising interest rates and a shift from growth to value stocks. But the business itself is also slowing: In the second quarter, META reported its first-ever year-over-year decline in quarterly revenue, which slipped 1%. Moreover, it expects another decline in the third quarter, due to softening economic conditions and weakness in ad spending. All the while, the company is investing billions in the metaverse in a bold long-term bet that requires short-term profit sacrifices. Analysts expect 2023 to bring a return to both revenue and earnings growth, but in the meantime, few short-term catalysts exist other than the potential price floor that bargain hunters could provide by snapping up a Silicon Valley stalwart at less than 18 times forward earnings.
Upstart Holdings Inc. (UPST)
Last, and least by year-to-date performance, is Upstart, the biggest swing-for-the-fences pick among the best stocks to buy for 2022. Upstart’s goal is nothing less than the total disruption of the traditional credit scoring system as exemplified by scores like Fair Isaac Corp.’s (FICO) FICO system. To Upstart’s credit, its artificial-intelligence-powered system has shown an ability to predict default rates with far greater accuracy than the FICO score, according to the company. That said, rising rates and a potential recession are hitting the loan market, and with Upstart recently getting into the business of holding loans — rather than merely scoring them — that pivot has proved untimely. The stock could still be a steal if it focuses on what it does best and takes market share from rivals like Fair Isaac, but further dabbling in the ownership of loans themselves could bring undue risk.
The best stocks to buy for 2022:
— EOG Resources Inc. (EOG)
— Grupo Aeroportuario del Sureste SAB de CV (ASR)
— Visa Inc. (V)
— Microsoft Corp. (MSFT)
— Alphabet Inc. (GOOG, GOOGL)
— Lowe’s Cos. Inc. (LOW)
— ASML Holding NV (ASML)
— Medifast Inc. (MED)
— Meta Platforms Inc. (META)
— Upstart Holdings Inc. (UPST)
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10 of the Best Stocks to Buy for 2022 originally appeared on usnews.com
Update 08/18/22: This story was published at an earlier date and has been updated with new information.
