The Dow and S&P 500 hit new all-time highs within the first few days of 2022 — absent the Nasdaq — but have gone on to have a difficult couple of weeks since. Despite that, there have actually been a handful of hot stocks.
These stocks not only withstood the selling pressure in the broader market, but they have actually traded higher too.
Another name for this list could be relative strength. That is, they are outperforming other stocks and the market as a whole. Further, these stocks tend to have strong growth and many of them have reasonable valuations.
In short, at a time when everything seems to be going south, these stocks still have the potential to go north. Let’s look at a few hot stocks to consider buying.
- Ford (NYSE:F)
- Energy Select Sector SPDR Fund (NYSEARCA:XLE)
- Exxon Mobil (NYSE:XOM)
- Toronto-Dominion Bank (NYSE:TD)
- Procter & Gamble (NYSE:PG)
- PepsiCo (NYSE:PEP)
- Pioneer Natural Resources (NYSE:PXD)
Hot Stocks to Buy: Ford (F)
Ford is an interesting stock, because had this article been published before Jan. 19, then it would have been a top-performing name. The stock would be above all of its major moving averages and it would be handedly beating the indices.
After a 20% spill from the recent high, Ford has lost a little bit of its luster. However, it’s now about flat on the year vs. the S&P 500 and Nasdaq, which are down 7.5% and 11.5%, respectively.
So despite the recent bumps in the road, Ford stock is still outperforming the broader market.
However, there’s a lot to be excited about here. Not only is the company electrifying some of its fleet, the country’s best-selling vehicle — the F-150 — is getting the jolt too. The company will soon release its F-150 electric pickup truck, beating most of its competition to the punch.
Doing so could unlock enormous potential for the stock. That is, if it trades anything like EV stocks in the recent past have traded. With a waitlist that topped 200,000 customers before Ford stopped taking reservations and plans to double production of the truck, there’s a lot to look forward to here.
Plus analysts expect pretty solid growth in 2021 and 2022 for the automaker, with estimates calling for a double-digit jump in revenue. Lastly, the stock trades at just ~10 times earnings and recently reinstated its dividend.
Energy Select Sector SPDR Fund (XLE)
A few weeks ago, there were only two sectors that were trading particularly well. One was financials, but that group went out the window once the big investment banks started reporting earnings. The other was energy.
While energy stocks finally took a dip with the market on Jan. 21 — as the S&P 500 was dropping to its 200-day moving average and with the Nasdaq in correction territory — there’s a chance this group could continue to move higher.
Of course, it all coincides with energy prices. Should demand for energy remain elevated, then demand for those stocks should too.
Every stock in the XLE’s top 10 holdings is up over the prior three months. That is, with the exception of its No. 10 holding, Kinder Morgan (NYSE:KMI), which is down 1.3%. However, that makes up just 3% of its fund.
In total, the top 10 stocks in the XLE make up 75% of its total weighting, so it’s rather significant that 90% of this group is higher over the past 90 days — particularly when the market is under so much pressure.
Hot Stocks to Buy: Exxon Mobil (XOM)
If we want to get specific within the energy space, let’s get specific. The top holding in the XLE ETF is Exxon Mobil, which has a 22.3% weighting. That slightly outweighs Chevron (NYSE:CVX), which has a 21.2% weighting.
I didn’t pick Exxon because it was the top weighting in the XLE ETF. Instead, I picked it based on its relative outperformance. Put simply, when the going got tough last week, Exxon held up better than many of its peers.
How it’s faring against Chevron is impressive too.
Exxon is up 18% so far this year and 46% over the past 12 months. Chevron has done well too — especially compared to the overall market — but is up just 8.2% and 33.1% this year and over the past 12 months, respectively.
Exxon is an energy conglomerate, so as long as demand remains steady for natural gas and crude oil, this stock should continue to perform well. Plus, the technicals continue to favor this stock, as well as this sector.
Helping the most might be the valuation. Shares trade at just 14 times 2021 earnings, which are forecast to grow 18% in 2022.
Toronto-Dominion Bank (TD)
The financials were a recent leadership group, but then the sector lost that distinction once JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS) and others began reporting their quarterly results.
Regional banks held up better, but eventually they were taken down too. The one exception has been Toronto-Dominion Bank.
Known as “TD” for short, this stock continues to perform pretty well. Perhaps it will be the next one to roll over — the next “domino to fall,” so to say.
But it continues to outperform its peers and if it can maintain some of its trend, it could continue to chug along to the upside.
Like Exxon, it has a low valuation, trading at just 12.2 times 2021 earnings. While its earnings and revenue growth forecast is only modest for 2022, it does pay out a 3.5% dividend yield.
Hot Stocks to Buy: Procter & Gamble (PG)
To see a consumer staple like this as a market leader is somewhat concerning. However, it’s hard to deny the strength we’re seeing in Procter & Gamble lately. That relative strength is no secret, either.
While P&G fell in two consecutive weeks to start off 2022, it had ripped off 10 straight weekly gains before that stretch. That’s pretty impressive for what many consider a boring and slow defensive stock.
Despite the soft pullback, shares were trading pretty well overall before the company reported earnings. Unlike what we’re seeing with most companies right now, the stock actually rallied on the results.
Earnings beat analysts’ estimates, while revenue of almost $21 billion beat expectations by $600 million.
Management cited strong demand as the reason for the beats. However, it was their comments about the future that helped propel the stock higher. The company raised its outlook for its full-year organic sales and cited strong pricing power.
When you have a business model that’s founded on innovation, that provides higher levels of delight, that solves problems better for consumers, you’re able to charge a little bit more,” said CEO Jon Moeller.
Another defensive leader is PepsiCo. While the stock market is hitting new lows for the year on Friday, Jan. 21, PepsiCo hit new highs. And I don’t just mean new highs for 2022, but new all-time highs.
Can the company keep it up? For what it’s worth, Coca-Cola (NYSE:KO) is also trading well, so it’s not as if PepsiCo is all alone amid its rally.
Analysts expect roughly 11% revenue growth this year and 13% earnings growth. However, with 2021 drawing to a close (at least in terms of the reported fiscal years), attention is shifting to 2022.
For next year, analysts expect revenue and earnings growth of just 4% and 8%. While those are pretty solid expectations, they are a deceleration vs. 2021, which could act as a negative catalyst. That is, unless management can tell a better-than-expected story to investors when the company reports earnings, like P&G did.
For now though, it’s hard to bet against the drinks and snacks conglomerate.
Hot Stocks to Buy: Pioneer Natural Resources (PXD)
I thought about bumping this gallery up to eight stocks, because I was torn between Pioneer Natural Resources and Mondelez (NASDAQ:MDLZ), the latter of which just hit new highs.
However, I decided to keep the list at seven stocks and go with Pioneer Natural Resources.
The stock and the business have momentum and when combined with its low valuation, I believe it could have more upside.
Analysts expect 190% revenue and 550% earnings growth in 2021. In other words, it was a massive recovery year for energy stocks, as demand came roaring back. However, 2022 isn’t forecast to be a year of slouching.
Analysts expect 16% revenue in the coming year, but the really exciting part is earnings. Consensus estimates call for more than 50% growth to the bottom line and comes at a time where the stock trades at just 15.5 times 2021 earnings.
On the date of publication, Bret Kenwell 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.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.