We’re near the midway point of 2022, and this year is shaping up to be a lot different than most investors had expected.
And that means, as investors look to retool their portfolios with the best stocks for the rest of 2022, they’ll have to take a somewhat different tack than they did at the start of the year.
The optimism following strong returns in 2020 and 2021 has given way to bear market angst.
All major U.S. indices crossed into official bear market territory in the first half of 2022.
As for the reasons?
“When we entered the year, stocks were expensive. We had a new generation of traders in the game who have never seen a bear market and thus had no understanding of the risk they were taking. We had new tech companies with shaky business models supported by cheap money. And we had inflation bubbling up, guaranteeing that the Federal Reserve would have to tighten monetary policy. Given those conditions, a bear market was inevitable.”
But as we look to the second half of the year, have those conditions changed?
And might there be some value in the wreckage?
“We’re seeing incredible opportunity here,” says Sonia Joao, chief operating officer of Robertson Wealth Management. “Some of our favorite growth names, particularly in technology, are trading at prices we never expected to see again. And some of our favorite income plays are sporting their highest yields in years.”
Today, let’s take a look, in no particular order, at four of the best stocks to buy for the second half of 2022.
Some of these will be familiar household names, but others will likely be new to you.
But all, for one reason or another, are well positioned to benefit from a recovery in the second half of the year and into 2023.
- Industry: Real estate (industrial)
- Market value: $81.7 billion
- Dividend yield: 2.9%
The aforementioned Amazon.com is just about unstoppable.
It’s all but inevitable that a greater and greater percentage of commerce will be happening online.
That means that demand for the logistical real estate that supports e-commerce is also unstoppable.
Prologis owns and operates more than 4,600 buildings with an astounding 1 billion square feet of space.
And it’s all about to get even bigger considering that Prologis just agreed to acquire its largest rival in the industrial space, Duke Realty (DRE).
Prologis’ shares have struggled in 2022, down about 35% from their 52-week highs.
REITs tend to be interest-rate sensitive, and the Fed’s aggressive rate hikes certainly haven’t helped.
Yet Prologis’ dividend yield, at 2.9%, is the highest it has been in years, and the company’s business prospects have never been brighter.
This best-in-class REIT is poised to recover, making it one of the best stocks to buy for the second half of 2022, and beyond.
- Industry: Home improvement retail
- Market value: $278.2 billion
- Dividend yield: 2.8%
Home Depot (HD, $270.73) deserves a good look.
HD shares have really struggled this year and are now down by about 35% from their highs.
We should look at this recent setback as a buying opportunity in one of greatest success stories in the history of American retail.
Inflation is a worry, and justifiably so.
Investors worry that inflation – and the higher mortgage rates that come with it – will deter home buying and major renovation projects.
Home Depot is not impervious to these forces, of course.
But it’s hard to see inflation having a meaningful impact on smaller do-it-yourself projects.
And the demographic trends supporting the housing market – namely the family formation of the millennials – are durable and should help to balance any weakness due to rising mortgage rates.
- Industry: Internet retail
- Market value: $1.1 trillion
- Dividend yield: N/A
But the optimism of that announcement has quickly faded as the shares have slumped.
AMZN stock is now trading by more than 40% below its all-time highs and has given back most of its COVID-era gains.
The shares are only marginally higher than they were in the summer of 2018, four years ago.
But here’s the thing: This isn’t the first time Amazon has taken a tumble.
The shares dropped by more than 30% during the late 2018 market correction and lost a quarter of their value or more in 2011, 2014 and 2016.
And then, of course, there was 2008, where the shares lost nearly two-thirds of their value.
Every time Amazon hit a rough patch, it came back stronger.
Naturally, today’s Amazon is a larger, more mature company than the brash internet startup it used to be.
It’s also struggling with growing pains typical of a company its size, such as labor unrest and political pressure.
But let’s ask ourselves a couple questions:
Do you buy more or less on Amazon today than you did five years ago?
And do you expect that you’ll be buying more or less five years from now?
Apart from being the leading internet retailer, Amazon remains the No. 1 player in cloud computing servicers via its AWS platform.
The shares trade at 2.3 times sales.
That’s marginally lower than the S&P 500, at 2.4.
However, while that’s not “cheap” in a traditional value sense, it’s a six-year low for Amazon, and that might be an attractive entry point in what could be one of the best stocks to buy for the rest of 2022.