A new year brings new opportunities for investors to punch their ticket to the greatest wealth creator on the planet: the stock market.
In 2021, the benchmark S&P 500 galloped higher by 27%, with the widely followed index racking up almost six dozen record-high closing prices. But if there’s one constant about Wall Street, it’s that there are always great deals to be found. The following 10 top stocks, which are a mix of growth, value, and income plays, could all make you a lot richer in 2022.
1. NextEra Energy
After watching growth stocks soar for the past 12 years, you’re probably just itching to buy an electric utility stock, right? While the idea might sound laughable, don’t discount NextEra Energy (NYSE:NEE), which has delivered a positive total return to shareholders in 19 of the past 20 years!
Most electric utilities grow at a low single-digit rate. But NextEra Energy has been consistently averaging high single-digit growth as a result of its aggressive investments in renewable energy. No utility in the country is currently generating more capacity from wind or solar than NextEra is. And this is unlikely to change anytime soon with the company investing an aggregate of $50 billion to $55 billion in new infrastructure projects between 2020 and 2022. It’s an especially smart investment with lending rates at historic lows.
Meanwhile, the company also benefits from the cash flow transparency of its traditional utility operations (i.e., those not powered by renewable energy). Since this traditional segment is regulated by state utility commissions, it means no exposure to potentially volatile wholesale electricity pricing.
Novavax is one of more than a dozen drugmakers working to create treatments for COVID-19. The company’s vaccine, NVX-CoV2373, was stellar in two late-stage trials in 2021. The U.K. and the U.S./Mexico trials produced vaccine efficacy rates of 89.7% and 90.4%, respectively. As one of only three prominent vaccines to reach efficacy of 90%, there looks to be a clear path to Novavax becoming a major global player in the fight against COVID.
Furthermore, investors are able to buy into Novavax relatively cheaply after the company ran into a number of operational snags last year, which are now in the rearview mirror. With Novavax beginning to receive Emergency Use Authorizations around the world, and the company expected to launch NVX-Cov2373 in numerous key markets this year, it’s a good bet to make investors richer.
3. Walgreens Boots Alliance
If you’re an investor who appreciates value stocks, pharmacy chain Walgreens Boots Alliance (NASDAQ:WBA), with its forward-year price-to-earnings ratio of 10, is a company with all the tools needed to make you richer in 2022.
Although Walgreens was hurt by reduced foot traffic during the initial stage of the pandemic, the company’s multipoint turnaround plan is already well underway and set to pay big dividends in the new year.
For example, the company was able to achieve over $2 billion in annual operating-expense reductions a year ahead of schedule. All the while, it’s been aggressively spending on digitization initiatives designed to encourage consumers to purchase products online for delivery, or for pickup via drive-thru. Even though online sales represent a small sliver of total revenue, it’s a segment with sustainable double-digit growth potential.
Arguably more exciting is that Walgreens has partnered with VillageMD to open roughly 600 full-service health clinics located in its stores in more than 30 U.S. markets. These clinics can funnel local residents right to Walgreens’ high-margin pharmacy.
Best-of-breed stocks are a good bet to make investors richer in 2022. That’s why Amazon (NASDAQ:AMZN), a leader in not just one category, but two, is a no-brainer buy.
Most people are familiar with Amazon because of its dominance in e-commerce. According to eMarketer, it accounted for an estimated 41.4% of all online sales in the U.S. in 2021. But it’s the company’s 200 million global Prime members who are really fueling the fire for this segment. The annual fees Amazon collects from its Prime users help to buoy razor-thin margins, and are what allow it to undercut brick-and-mortar retailers on price.
What folks might not realize is that Amazon is also the leader in cloud infrastructure services. Amazon Web Services accounts for close to a third of all global cloud infrastructure spending. The important thing to recognize here is that cloud services, along with advertising and subscriptions, are Amazon’s fastest-growing and highest-margin segments. As long as these segments continue to grow rapidly, Amazon’s share price and operating cash flow can head significantly higher, even if growth in e-commerce revenue slows dramatically.
PubMatic operates a cloud-based programmatic ad platform and is a sell-side provider. In English, this means its software handles the optimization of digital ad placement, with the company selling display space for publishers (its clients). Though publishers do offer input, such as the minimum price they’d be willing to accept to sell display space, PubMatic handles everything else. The platform’s machine-learning algorithms are designed to put relevant ads in front of users, while also maximizing what publishers net from advertisers.
The beauty of the PubMatic operating model is that advertising dollars are shifting more and more to digital platforms. Whereas global digital ad spend is expected to increase by an average of 10% annually through mid-decade, PubMatic’s sales growth has consistently doubled up this forecast. And it’s averaged an organic growth rate of at least 50% in four straight quarters. If that’s not a ringing endorsement of its sell-side platform by publishers, I’m not sure what is.
6. Annaly Capital Management
Income investors can make bank with top stocks in 2022 as well. Mortgage real estate investment trust (REIT) Annaly Capital Management (NYSE:NLY) offers an inflation-crushing, yet sustainable, 10.9% dividend yield, and has averaged a yield of roughly 10% over the past two decades.
Put simply, mortgage REITs like Annaly aim to borrow money at lower short-term rates, which can then be used to purchase higher-yielding long-term assets, such as mortgage-backed securities. Subtracting the average borrowing rate from this long-term average yield produces what’s known as net interest margin.
During the early stages of an economic recovery, it’s very common for the interest rate yield curve to steepen (i.e., the gap between long-term and short-term Treasury bond yields widens). When this happens, Annaly usually sees its net interest margin rise.
What’s more, Annaly almost exclusively buys agency assets that are backed by the federal government. This allows the company to prudently use leverage to its advantage.
7. UnitedHealth Group
Another top stock with a long history of making its shareholders money is UnitedHealth Group (NYSE:UNH). It’s provided a positive total return for shareholders in 18 of the past 20 years.
UnitedHealth Group is probably best known for providing health insurance. While insurance isn’t a fast-growing market, it does provide the company with transparent and predictable cash flow. It also doesn’t hurt that insurance companies usually have strong pricing power when it comes to increasing premiums to cover their expenses. However, UnitedHealth’s key operating segment isn’t insurance — it’s Optum.
Optum handles pharmacy-care services, provides healthcare software, and offers other high-margin health management services for hospitals and clinics. Optum is growing much faster than the insurance segment, and is capable of much higher margins as well.
8. Ping Identity Holding
As its name rightly suggests, Ping’s cloud-based platform focuses on identity verification for its clients. It also leans on artificial intelligence to grow smarter at recognizing and responding to potential threats over time. Ping’s platform is especially useful when layered atop on-premises solutions, where it helps by continuously monitoring and approving user activity.
The great thing about cybersecurity solutions is that they offer exceptionally high margins. In Ping Identity’s case, the company is shifting its client base away from term-based licenses to software-as-a-service subscriptions. This should ultimately improve customer retention rates, lift margins, and sustain the company’s double-digit annual growth in recurring revenue.
At an estimated 6 times 2022 sales, Ping is one of the best values in the cybersecurity space.
9. Trulieve Cannabis
Unlike most MSOs, Trulieve has approached its expansion in a unique way: by primarily focusing on a single market. As of last week, the company had 160 operating dispensaries nationwide, with 112 stores in medical-marijuana-legal Florida. Saturating the Sunshine State has helped Trulieve gobble up approximately half of Florida’s dried flower and oils market share. More importantly, it’s kept marketing costs down, which has allowed the company to report three consecutive profitable years.
Trulieve’s next chapter was written when it closed its acquisition of Harvest Health & Recreation in the fourth quarter. MSO Harvest Health had a leading presence in Arizona prior to its acquisition, which clears the way for Trulieve to become the dominant player in yet another billion-dollar cannabis market.
10. Meta Platforms
The 10th and final top stock that should make investors richer in 2022 is Meta Platforms (NASDAQ:FB), the parent company of social media platform Facebook.
If you want to see dominance, just pull up Meta’s monthly active user (MAU) count across all of its platforms. In the third quarter, 2.91 billion people visited Facebook each month, with another 670 million unique users visiting Instagram and/or WhatsApp, which Meta owns as well. These 3.58 billion MAUs represent more than half of the global adult population, and are the precise reason advertisers will pay through the nose to get their message in front of this vast array of viewers.
Beyond advertising, Meta is also a play on the metaverse, the next iteration of the internet that allows users to interact in 3D environments. The company owns the popular Oculus virtual reality devices, and invested $10 billion in metaverse-related projects last year alone.
A forward-year price-to-earnings multiple of 23 is too inexpensive for a company with a growth rate exceeding 20% and this many competitive advantages.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.