2021 was another banner year for stocks. Major indices like the S&P 500 (up 27.23% year-to-date) and Nasdaq Composite (up 22.45% year to date) delivered another year of above-average returns. But stock market profits in 2022 may not be as easy as buying the index. Instead, it may come down to knowing which stocks to buy.
Why? There’s a lot on the table that could put pressure on stocks across the board. Inflationary pressures could weigh on earnings. The prospect of rising interest rates could further dampen interest in growth stocks. As for pandemic recovery plays? Omicron has already impacted their performance, and could continue to do so. With this, it seems very unlikely indices will deliver another year of 20%-plus returns.
So, if stock picking is the way to go this year, which areas should investors focus on? As value investing could make a comeback this year, such names are a solid place to look for opportunities. That’s not to say value stocks should be written off completely, however. Several underappreciated electric vehicle (EV) plays could break out in 2022. So too could some growth names that experienced big declines during 2021.
As we ring in 2022, consider the following 10 names, a mix of growth and value plays, stocks to buy. Each one has high potential to deliver stunning returns:
- Academy Sports and Outdoors (NASDAQ:ASO)
- CommVault Systems (NASDAQ:CVLT)
- EVgo (NASDAQ:EVGO)
- Gores Guggenheim (NASDAQ:GGPI)
- Kohl’s (NYSE:KSS)
- Pinterest (NYSE:PINS)
- Sundial Growers (NASDAQ:SNDL)
- AT&T (NYSE:T)
- Tenneco (NYSE:TEN)
- ViacomCBS (NASDAQ:VIAC)
Stocks to Buy: Academy Sports and Outdoors (ASO)
Over the past year, up 100% year-to-date, sporting goods retailer Academy Sports and Outdoors may seem like a name set to deliver more muted returns in 2022. Yet while the sell-side community expects it to see its earnings decline in the next fiscal year (ending January 2023), that doesn’t mean shares will necessarily see a decline as well.
First off, despite its strong performance, ASO stock is cheap. Shares trade at a forward price-to-earnings (P/E) ratio of 6.73x. Yes, that’s on par with its peers, like Hibbett (NASDAQ:HIBB), which trades for 6.81x earnings. Still, trading at such a low multiple of its earnings, the company’s debt repayment and share repurchase plans (detailed by our Louis Navellier in November) will have a significant impact on increasing the underlying value of each share.
Second, the retailer’s performance next year may not be as bad as once expected. The team at Bank of America recently raised their FY23 earnings forecast for Academy. The sell-side analysts also “see potential for accelerated store growth.”
With this, the investment bank reiterated its “buy” rating. It also raised its price target to $68 per share (it’s at around $43 per share today). At depressed prices, due to the expectation that earnings will drop following the pandemic recovery, ASO stock has big upside if this thesis is proven wrong.
CommVault Systems (CVLT)
A few weeks back, my InvestorPlace colleague Josh Enomoto recommended CVLT stock, a cybersecurity play, as one of the best small caps to buy for the coming year. Taking a look at the details, it’s easy to see why.
Namely, because it’s cheap. At least, relative to its potential to deliver steady growth in the coming years. Yes, shares got hammered back in October, due to an earnings miss and weak revenue guidance. But as a Seeking Alpha contributor argued just after it announced its bad results and outlook, these issues may be temporary, a product of the supply chain headwinds the software industry is experiencing now.
In 2022, growth could bounce back. In large part, due to the success of CommVault’s Metallic SaaS platform, a product line that’s seeing significant growth. This could help send the stock, at almost $70 per share today, back to its 52-week high ($84.22). After that, perhaps up to new multi-year highs.
Earnings growth, along with multiple expansion, could easily send it up to $100 per share. Still beaten down by its late October earnings miss, consider it one of the best stocks to buy for 2022.
Stocks to Buy: (EVGO)
After spiking following passage of Congress’s infrastructure bill, EV charging play EVgo has given back these gains. At $10.10 per share, the former special purpose acquisition company (SPAC) is now back down below its SPAC offering price.
Nevertheless, EVGO stock has high potential to break out in the coming year. How so? While overshadowed by better-known charging plays like ChargePoint (NYSE:CHPT), the company has leading market share in a key segment of the charging space (DC fast charging sites). Put simply, this makes it a much more formidable contender in the charging wars than it seems at first glance.
Along with this, EVgo’s partnerships with General Motors (NYSE:GM) and Uber Technologies (NYSE:UBER) could help drive growth in the years ahead. Fading enthusiasm for EV plays is keeping it down. Analyst coverage on it is mixed as well, although the average analyst price target for it comes in at nearly 90% above its current stock price.
Even as a recovery hinges on the market’s bullishness for EV stocks coming back, keep EVGO stock on your radar. If there’s renewed interest in charging names, there may be time to buy it before it takes off once again.
Gores Guggenheim (GGPI)
Like EVGO stock, admittedly GGPI stock is only going to soar in price if “EV Mania” experiences another wave in 2022. If you’re unsure this will happen, you may want to skip out on it. Yet if you’re bullish EV stocks will perform well next year, as the trend isn’t going away?
You may want to pick this play rather than more popular ones like Lucid Group (NASDAQ:LCID), Rivian (NASDAQ:RIVN), and Tesla (NASDAQ:TSLA). Mostly because Gores Guggenheim (for now a SPAC), could experience its first true “liftoff” moment, once its merger with Sweden-based EV maker Polestar closes, expected to happen sometime in 2022.
With backing from Geely (OTCMKTS:GELYF) and its Volvo unit, Polestar is already off to a great start. It expects to generate $1.6 billion in revenue this year. Three years from now, its annual revenue could be 10 times that, if it’s able to ramp up deliveries to 290,000 vehicles per year.
At today’s prices, the implied value of Polestar is reasonable compared to its peers. I wouldn’t buy it with the expectation it makes the same sort of moves Lucid and Rivian made in 2021. But with high potential to see moderate acceleration, it’s one of the best EV stocks to buy, if you’re confident such plays will again become popular among investors.
Stocks to Buy: Kohl’s (KSS)
With historically high rates of inflation, and the supply chain headwinds, investors have low expectations for department store stocks. That’s why the market has priced them at what best could be described as bargain basement valuations.
Kohl’s stock is a prime example of this, with its super low P/E ratio of 8.88x. Sure, like other low-priced stocks, Wall Street has given it this valuation. Primarily, on the expectation that earnings in the coming fiscal year will see a sharp drop. But if its latest quarterly earnings and guidance are any indication, this concern may be overblown.
Beating analyst earnings per share (EPS) consensus by a wide margin last quarter (actuals of $1.65, versus 70-cent estimates), the retailer could continue to surprise over the next few quarters. This may enable KSS stock, up around 21.85% over the last year to see another surge in price in 2022.
That’s not all. With activist investors rattling its cage, Kohl’s could make moves in the coming year to help unlock underlying value as well. Such moves include a sale of the company to a private equity buyer, a spinoff of its e-commerce unit, or monetization of its real estate assets. Trading just under $50 per share today, this is another stock that could perform well over the next year.
PINS stock struggled throughout 2021, as the pandemic recovery brought with it a slowdown in user growth for the social media platform. Other factors, like a rumored buyout of it by PayPal (NASDAQ:PYPL) that failed to pan out, weighed on it as well.
So, with investors who got in about a year ago well underwater, what makes Pinterest a buy for 2022? User growth still could re-accelerate, as the company carries on with its international expansion. Revenue growth will likely carry on as well, as it continues to ramp up monetization efforts, to increase average revenue per user (ARPU).
Granted, PINS stock may seem pricey at a forward P/E of 34.6x. But this valuation may be underpricing the stock, relative to growth projections. Despite its reputation as a busted growth story, analysts estimate the company will see 24.9% sales growth, and a similar level of earnings growth, during 2022.
Again, like with other growth plays discussed above, I’ll concede that rising interest rates, and the multiple compression that could follow, is a concern. While “cheap” relative to other social media plays, it could get “cheaper” if there’s a further exodus out of growth stocks. That said, if you are of the opinion that the Federal Reserve’s interest rate hikes will not sink stocks? You may want to buy Pinterest stock.
Stocks to Buy: Sundial Growers (SNDL)
Its glory days as a meme stock have long since passed. Yet cannabis play SNDL stock remains an interesting opportunity for two reasons. First, of course, is the U.S. legalization angle. Even as investors have been disappointed thus far, the political winds are still shifting in the direction of legalization.
With more Republican politicians now pushing for pot law reforms, legalization could still be just around the corner, no matter who controls the U.S. Congress after the midterm elections. News of progress with making marijuana fully legal in the U.S. could send shares in this Canada-based pot company “to the moon” once again.
However, that’s not the only way SNDL stock could get to higher prices. Success with its mergers and acquisitions (M&A) strategy, or with the debt/equity investments it’s making in other cannabis companies, there’s something else in play that could send it from the 62 cents per share it trades for today, back to prices well over $1 per share.
Sundial isn’t the only appealing pot play out there. Another beaten down name, Tilray (NASDAQ:TLRY), also looks appealing, for similar reasons. Consider either of them stocks to buy, ahead of a possible comeback over the next year.
A few weeks back, I had a mixed take on AT&T stock. While in agreement with the bulls that there was big upside potential from its spinoff/turnaround plans, souring sentiment due to its planned dividend cuts signaled to me that further moves lower were ahead.
Yet as it appears investors have warmed up to it lately, I may have jumped to the wrong conclusion. The media and telecom giant’s move back to near $25 per share, after slipping to the low of $20s per share, could mean that dividend investors teed off about the pending cut may have now finally left the scene.
In turn, investors long T stock today may be in it for the potential upside that may arise when its large-scale restructuring plan is complete. As you may know, the company plans to divest its WarnerMedia segment next year. The media segment will merge into Discovery (NASDAQ:DISCA), with the combined company becoming Warner Bros. Discovery.
AT&T will then distribute the majority stake it’ll receive in the combined entity to its shareholders. After that, “Ma Bell” will become a telecom pure play once again, likely with a lower but still above-average dividend yield. The value of the stock broken up could be significantly higher than what it trades for today. You may want to grab it now, as it may now be more likely to zoom back to $30 per share, rather than retreat back to near $20 per share.
Stocks to Buy: Tenneco (TEN)
During the first half of 2021, confidence in its turnaround sent auto parts maker Tenneco to as much as $22.75 per share. But over the past six months, the global chip shortage has impacted its performance. At around $12.81 per share today, it’s down around 35% in the past six months.
However, if you’ve been looking for a way to wager that this issue will resolve in the coming year? This may be one of the best vehicles to do so. If the crisis resolves, and auto production gets fully back to normal? The auto part maker has a strong chance of delivering earnings over the next four quarters in line with analyst expectations.
With analyst consensus calling for earnings of $4.65 per share, TEN stock is a steal at today’s prices. Even as auto parts makers typically trade for low multiples, if the stock simply maintained its current multiple of 2.08x, a move to $25 per share may be possible.
Considering its highly leveraged balance sheet, and the cyclical nature of the auto parts business, be careful. A continuation of the chip shortage could send it even lower. Risk-hungry investors, though, may find it to be an worthwhile opportunity.
ViacomCBS is one of many “old media” stocks trading at deep value prices, due to concerns their respective streaming game plans will fail to make up for shrinking audiences for legacy properties. Among the pack, this one may not be the cheapest. For example, AMC Networks (NASDAQ:AMCX) trades for just 4.66x earnings. This media stocks trades at a higher, but still relatively low forward multiple (8x).
Yet given the success it’s had so far with streaming, VIAC stock appears mispriced. With the company planning to report streaming as its own segment starting next quarter, investors will soon have a better idea how much new media makes up its top and bottom line.
If this accompanied with better-than-expected results, and an indication that streaming is more than making up for TV’s secular decline? A move to a much higher valuation could happen over the next year.
At $33 per share today, shares traded for as much as $101.97 per share right up until the Archegos fund blowup — caused its collapse in price. I would count on a full move back to $100. However, as even a partial recovery would mean big gains for those buying it today, consider it one of the best stocks to buy right now.
On the date of publication, Thomas Niel 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.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.