2021 was a tough year on multiple fronts, largely due to the ongoing Covid-19 pandemic. With vaccines approved by the Food and Drug Administration (FDA), this was supposed to be the year of the economic turnaround and a return to normalcy. Well, that didn’t fully happen. Now, we expect 2022 to be what 2021 was supposed to be. Likewise, investors are looking for stocks to buy that pair well with these new expectations.
With 69% of the U.S. population having received at least one dose of the vaccine and 58.1% fully vaccinated, there’s reason to believe 2022 will be that return. Investors could be less concerned about the pandemic and more concerned about improving earnings right now.
From the market perspective, that’s a fortuitous sign for those interested in finding stocks set to thrive in the coming year. Fortunately, there’s no shortage of potential deals to be had. Let’s take a closer look at those stocks to buy that can thrive in 2022:
- Realty Income (NYSE:O)
- Kinder Morgan (NYSE:KMI)
- Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B)
- Apple (NASDAQ:AAPL)
- Starbucks (NASDAQ:SBUX)
- Petroleo Brasileiro (NYSE:PBR)
- Tencent (OTCMKTS:TCEHY)
Stocks to Buy: Realty Income (O)
Realty Income is a real estate investment trust (REIT), as you almost certainly guessed based on its name. REITs own and operate real estate that produces income. Investors expect these funds to provide a steady stream of income in the form of retail rents, but little in the way of price appreciation of the stock itself. There are any number of real estate niches REITs may target, and those looking for more information on the asset class should start here.
Realty Income, though, is squarely focused on retail, which includes a number of household names. Its top three clients include 7-Eleven, Walgreens (NASDAQ:WBA) and Dollar General (NYSE:DG), which account for nearly 15% of its annualized revenue.
So, Realty Income is essentially a rebound and reopening play for 2022. Investors considering O stock should be looking toward its dividends and income stream when judging its fit. There is good news there for both the short- and long-term outlook of the REIT.
For one, Realty Income announced on Nov. 16 that it would increase its common stock monthly dividend from 23.6 cents per share to 24.6 cents per share. That equates to a 5.1% jump for shareholders.
Longer term, the company has paid 616 consecutive monthly dividends and provided a 15.1% average annual return since its inception in 1994.
Kinder Morgan (KMI)
Kinder Morgan is an energy infrastructure company that works to get oil and other petroleum products from point A to point B. It owns and operates pipelines and terminals across North America. In fact, it counts roughly 83,000 miles of pipeline and 144 terminals within that geography.
Part of the reason to consider KMI stock relates to stability, and the other part relates to current opportunity.
First of all, Kinder Morgan is one of the largest energy infrastructure companies within the S&P 500. That implies the firm can leverage its network and scale to impact revenue and profitability at large. But its stability is truly reflected in its dividend and its dividend policy.
The firm’s quarterly dividend was recently increased to 27 cents per share, a 3% increase over the same period a year prior. That increase is part of a larger effort that includes a $2 billion stock buyback program. And with oil prices remaining high, Kinder Morgan is in position to continue to return respectable cash flows to its investors.
If a return to normalcy materializes in 2022, there’s even more reason to be interested in KMI stock. Prices remain below pre-pandemic levels, which stood at the $20 range. Given that KMI shares trade around $16 currently, there’s plenty of room for optimism. Combine that with the steady income its dividend provides, and you have the bull thesis for Kinder Morgan moving forward.
Stocks to Buy: Berkshire Hathaway (BRK-A, BRK-B)
I’d venture to guess that any mention of Berkshire Hathaway immediately conjures up the names Warren Buffett and Coca-Cola (NYSE:KO) for most. Buffett is, of course, its founder and a notable proponent of investing in U.S.-based companies.
That’s a good part of the reason he and his firm have become synonymous with Coca-Cola. That might lead many to believe the soft drink company represents the biggest share of Berkshire Hathaway’s portfolio of investments. Actually, though, it is number four on that list, currently comprising 7.15% of its holdings.
In truth, Apple is the company’s largest holding at 42.78% of its portfolio. A cursory read through of that list strongly reinforces the idea that Buffett is focused on the strength of the American economy.
As the U.S. rebounds, the stock effectively acts as a catch all for those improving earnings across the entirety of the economy. In a sense, an investment in Berkshire Hathaway is similar to investing in an ETF that tracks a major index.
And there’s plenty of reason to believe price appreciation lies ahead for BRK-A and BRK-B shares in 2022.
The more important you are, the more often you’ll be written about. Given that Apple is currently the highest-valued company out there based on market capitalization, it is constantly in the headlines.
There’s likely more research into Apple than any other firm in the world. As a result, there’s no shortage of information to sift through related to the company.
A few weeks ago, the market was worried about Apple even though it reported very strong earnings on Oct. 28. The tech giant reported a record $83.4 billion in quarterly revenue. Despite the fact that those revenues represented a 29% increase on a year-over-year (YOY) basis, larger concerns loomed.
For one, Apple was trailing the broader markets in terms of price appreciation. As of Friday, Nov. 26, the S&P 500 had provided a total return of 26.49% this year. AAPL stock was a less attractive 21.38% at its Friday price of 157.08. But that gap has closed considerably since then, as Apple share prices have increased over the past month.
That’s an encouraging sign that the market is warming up to Apple again after disregarding it for long portions of 2021.
Stocks to Buy: Starbucks (SBUX)
Starbucks is one of the riskier stocks on this list given its current labor concerns. I’ll admit that much.
The company intends to raise the wages of its employees. So, although Starbucks anticipates 13.4% revenue growth in 2022, it is undertaking a balancing act.
It has reported that operating margins will be around 17% in 2022. That’s below longer-term goals of 18% to 19%, and rising wages certainly contribute to that lower expectation.
Employees are also increasing collective efforts to unionize across the U.S. That further implies near-term labor issues could worsen.
Basically, this is a contrarian pick given the near-term issues. Those could easily be sorted out in the coming year and end up minor afterthoughts in the greater picture. For those that find logic in that explanation, there’s plenty of upside. Target prices sit at $123.75, well above current prices.
Petroleo Brasileiro (PBR)
Petroleo Brasileiro is the second oil company on this list. It is better known by the name Petrobras. The Brazilian state-owned exploration & production (E&P) oil firm is the largest in Latin America by sales and within the top 200 of the Fortune Global 500 list.
Recent results have been somewhat disappointing. Third-quarter revenues were down 3.9% on a YOY basis. Further, through the first nine months of 2021, the company saw revenues decline by 3%.
But the longer-term view suggests reason for optimism, implying Petrobras will thrive in 2022. Consensus expectations are that the firm will record somewhere in the neighborhood of $81 billion in revenues this year.
However, that is expected to rise to approximately $84 billion in 2022. Given that top line increases correlate with increasing stock prices, PBR stock certainly looks favorable at present.
Stocks to Buy: Tencent (TCEHY)
Tencent has to be the riskiest stock on this list. As a central figure in the Chinese economy, the tech firm was among the first to suffer as a bevy of regulations befell China’s giants. It is the less-often-mentioned counterpart to Alibaba (NYSE:BABA).
To be sure, Tencent’s troubles haven’t yet abated. The company’s recent quarterly revenues grew at their slowest pace since 2004, when it first went public. That’s hardly appealing, right?
Analysts agree that a spate of new regulations, including those which limit time spent online by minors, should hammer Tencent, a social media and gaming firm. And they clearly have.
However, they also know that Tencent is playing along with Beijing. The company should see 2022 revenues of approximately $103 billion. That isn’t a massive increase over 2021’s predicted $90 billion. But Tencent has too much upside and remains little more than a favorable regulation away from a quick turnaround. Therefore, investors should consider adding its shares to their list of stocks to buy for a 2022 recovery.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.