This year hasn’t turned out as expected so far for a lot of investors.
The most significant war in Europe in 70 years and surging inflation have a way of ruining the best-laid plans.
But that doesn’t mean there aren’t ways to profit for the rest of the year and beyond.
Kiplinger has assembled a list of 22 stocks to consider for the rest of 2022.
We’ve culled five of them from a cross-section of sectors based on name recognition, growth potential, defensive characteristics, and dividends.
- Industry: Entertainment
- Market value: $238.2 billion
- Dividend yield: N/A
If there were ever a company that has proven its ability to adapt in a hurry, it would be Walt Disney (NYSE:DIS).
The pandemic easily could have been Disney’s undoing.
Its theme parks were closed or had limited capacity for months.
Its movie business was dead on arrival.
And even its ESPN sports programming business was upended by the canceling or curtailment of most professional sports for months.
And yet, “the old saying that ‘luck favours the prepared’ can be applied to Disney’s November 2019 launch of the Disney+ video service,” says Argus Research analyst Joseph Bonner, who rates DIS shares at Buy.
Suddenly, tens of millions of bored, homebound people had the itch (and the time) to stream hours of Disney, Marvel and Star Wars content.
Disney+ was an instant hit and absolutely crushed expectations, sending Disney’s shares sharply higher in 2020.
However, DIS shares came back down to earth in 2021 and are off about 31% from their 52-week highs.
But here’s the thing: Nothing has changed. Disney+ is still emerging as the strongest competitor to Netflix and boasts a truly unrivalled catalog of content it’s assembled over the decades.
Disney’s movie business is back, as evidenced by the flurry of Marvel superhero movies planned.
And the theme parks? Did you really think they’d stay down long?
“We expect EPS to double in FY22 as the company recovers from the pandemic, with more normal though still strong 17% growth in FY23,” Bonner says.
At today’s prices, the communications trades at a slight discount to where it did immediately before the pandemic struck.
But Disney’s empire has only grown since then.
That, and a share-price lull in recent months, has DIS poised to be one of the best stocks to buy for 2022.
- Industry: Capital markets
- Market value: $151.8 billion
- Dividend yield: 1.0%
There’s little in financial services that Charles Schwab (NYSE:SCHW) doesn’t do.
It’s a brokerage firm, a money manager, corporate retirement plan administrator and a bank.
And it has been gobbling up assets under management (AUM) with new accounts and acquisitions.
Its TD Ameritrade acquisition pushed total AUM to $7.4 trillion.
Rising interest rates should be icing on the cake in 2022.
Every 0.25-percentage-point improvement in rates means another $750 million to $950 million in earnings, or about 30 to 38 cents per share, says portfolio manager Andy Adams at Mairs & Power Growth Fund.
Wall Street analysts project that annual earnings will climb 26% in 2022, and even more next year.
Just note that unlike some of 2022’s other top stock picks, Schwab is not exactly cheap.
At $80, SCHW trades at nearly 21 times year-ahead earnings.
- Industry: Industrial real estate
- Market value: $122.4 billion
- Dividend yield: 1.9%
There are certain trends that were in place long before anyone had ever heard of COVID-19 and will be around long after the current omicron variant is a distant memory.
The rise of e-commerce is one of them. Amazon.com (NASDAQ:AMZN) and its brethren are taking over the world.
But knowing this, why shouldn’t we profit from it as Amazon’s landlord?
Lucky for us, we can. Prologis, a real estate investment trust (REIT), is the industry leader in logistical real estate.
It also happens to be a major landlord to Amazon and other e-tailers.
Internet shopping is sleek. It feels clean and modern.
But none of those mouse clicks amount to anything without the underlying infrastructure to actually fulfill the orders. That’s where Prologis steps in.
To put some real numbers to it, a shocking 2.5% of the world’s GDP – or more than $2.2 trillion – already flows through Prologis properties.
And as e-commerce continues to grow as a percentage of the total, it’s a good bet that Prologis will grow right along with it.
The company already owns nearly a billion square feet of space in properties spread across 19 countries with an occupancy rate of 96.6%.
Prologis is not just one of the best stocks to buy for 2022. It’s one of the best stocks to buy and hold for the next 20 years.
Shares yield 1.9%, which is only slightly better than the market. But PLD has more than doubled its payout since 2013.
Glassman’s contrarian bias paid off in 2021 when he shook off his disastrous 2019 choice of Diamond Offshore Drilling (it went bankrupt) and scored a double with Oneok.
Searching for value again, he has arrived at Starbucks (NASDAQ:SBUX), which took a big (and to his mind, unwarranted) hit over the summer when the company warned of a slower recovery in China.
Glassman is “taking advantage of skittish investors” and recommending Starbucks, one of the world’s best-run companies, growing steadily with 33,000 outlets worldwide.
It’s also worth noting that founder Howard Schultz has taken over the reins for a year time and told employees in a video that the company is going to:
“…make promises that we will keep, promises that are real, and solve problems that exist in your stores.”
- Industry: Integrated oil and gas
- Market value: $332.1 billion
- Dividend yield: 3.4%
We might hope for a greener future.
But good old-fashioned oil and gas is still what keeps the global economy moving.
Many of the growth and tech names that lead the bull market of the past decade look stretched.
So investors scouting out the top stocks to buy for 2022 might look to more traditional value plays.
Energy super-major Chevron (NYSE:CVX) fits the bill.
CVX trades for 14 times expected 2022 earnings and sports a dividend yield of 3.4%.
That’s remarkably cheap in a market that, by several measures, is the most expensive it has been since the bubble years of the late 1990s, and for a stock that has ramped up by 46% in 2022 alone.
Energy stocks are still unloved and under-owned.
As recently as 10 years ago, the energy sector made up 13% of the S&P 500. Today, they make up about 2%.
Some of this is due to green mandates to diversify away from oil and gas, though most is simply due to the fact that energy stocks have endured a truly miserable oversupplied market since late 2014.
But here’s the thing: No market stays oversupplied forever.
And the brutal environment of the past several years forced many marginal operators out of business and many marginal projects offline.
And as a result, today we have a healthier market.
Supply and demand are in balance, and energy prices enjoyed a nice bounce in 2021 (and have continued the momentum into 2022).
Time will tell whether this trend continues.
Additional COVID variants could pop up and dampen demand for oil.
But several analysts outfits see higher oil prices in the new year, including the Wells Fargo Investment Institute, who sees another 19% to 39% rise to between $120 and $140 per barrel.
And who wouldn’t want to own a shares of a true survivor trading at a major discount to an otherwise expensive market?