Until a two-day, 6.7% rally came along, the Nasdaq was enduring its worst January in its 50-year existence. For some, it felt like a stock market crash, but there are still some great stocks to buy after the sell-off.
Specifically, the selling was particularly concentrated in tech stocks. Even more violent was the selling in growth tech stocks. Some of those names are like “babies being thrown out with the bath water.” In other words, good companies being sold lower with the bad ones.
But amid all of the chaos created from the bear market in tech, the rising-rate narrative from the Fed and the ongoing Covid-19 pandemic, there are a handful of stocks to buy that were resilient last month.
Many of those names were in energy, as crude oil prices continue to climb higher. Some of the stocks were in financials, while a handful came from surprising industries.
Let’s get a closer look at the relative strength leaders from last month.
- Halliburton (NYSE:HAL)
- Occidental Petroleum (NYSE:OXY)
- Exxon Mobil (NYSE:XOM)
- Las Vegas Sands (NYSE:LVS)
- Activision Blizzard (NASDAQ:ATVI)
- Wells Fargo (NYSE:WFC)
- Mastercard (NYSE:MA)
Stocks to Buy: Halliburton (HAL)
January performance: 34.4%
The energy sector was a powerful performer and has been the best-performing sector in 2022. In fact, energy has been the best sector this year, as well as over the last one, three, six and 12 months.
So in that respect, it’s no surprise that Halliburton is among the top performers from last month. Given how the Energy Select SPDR ETF (NYSEARCA:XLE) and crude oil continue to perform, it’s hard to bet against Halliburton until those two observations are no longer true.
After a strong year of growth, Halliburton isn’t done just yet.
Analysts expect sales growth of almost 20% in 2022 to go along with 64% earnings growth. While it’s early to be talking about fiscal 2023, the estimates for that year are strong as well. Consensus estimates currently call for revenue and earnings growth of 13% and 33%, respectively.
In that sense, Halliburton likely remains a buy-on-dips candidate until the energy sector and oil prices take a spill.
Occidental Petroleum (OXY)
January performance: 29.9%
Coming in at just under a 30% return for the month of January, Occidental heads up the list at No. 2. One more energy name will come in at No. 3, and then after that we’ll dive into some others on the list.
Like Halliburton, a surge in energy prices is helping to drive Occidental stock higher. With a return in demand due to increasing economic activity and travel, demand continues to increase for oil. However, without enough supply to match that demand, we’re seeing prices continue to climb. A big boost in inflation is only fueling that fire.
While that creates a bit of a headache for the rest of the world, it creates a boon for energy stocks like Occidental Petroleum. While Occidental doesn’t boast as strong of expectations for 2022 revenue growth, analysts still expect earnings to grow 62% this year.
Will that keep a bid in the stock price? Bulls are hoping (and betting) so.
Exxon Mobil (XOM)
January performance: 24.1%
Last but not least from the energy sector, we have Exxon Mobil. The largest energy company by market cap in the U.S., Exxon weighs in with a market cap of nearly $350 billion.
With energy pricing surging back to life, this conglomerate is seeing its stock roar to life as well. With its hands in virtually every space of this sector, the company’s top and bottom lines are swelling with renewed demand.
Shares were up more than 24% last month and while that momentum may continue going forward, one would expect that Exxon stock will eventually need to rest. That’s unlikely though until oil prices take a breather.
Exxon recently reported earnings, delivering impressive results on Feb. 1. Along with solid top- and bottom-line results, Exxon delivered a monster cash flow beat, while also initiating its $10 billion buyback plan.
If energy prices are going to rise, Exxon is likely to as well.
Stocks to Buy: Las Vegas Sands (LVS)
January performance: 16.4%
Shifting gears a bit, we’re seeing a surprising name on this list: Las Vegas Sands.
Shares rose more than 16% in January, despite fears of the omicron variant wreaking havoc on staff shortages and travel plans. If you pull up the charts for cruise, casino and airline stocks, you’ll be surprised that they held up decently well. As a result, it makes one wonder if these stocks will be go-to picks once the Covid concerns die back down and ahead of more travel-friendly time periods.
Analysts expect more than 50% revenue growth in each of the next two years for Las Vegas Sands, as well as triple-digit percentage growth for earnings in 2022 and 2023.
Perhaps even more encouraging is the stock’s reaction to earnings. While shares slumped after the company reported earnings on Jan. 26, the stock is up since reporting a top- and bottom-line miss.
Rallying on bad news is a good sign for bulls.
Activision Blizzard (ATVI)
January performance: 18.7%
This one is a bit unique, given that Microsoft (NASDAQ:MSFT) agreed to buy the company for $95 a share, or almost $69 billion. It’s Microsoft’s way to further propel it into cloud-gaming and the metaverse.
Microsoft already owns the Xbox console, as well as the popular gaming series Halo. Now it will add one of the top video game companies in the world to its arsenal (pending regulatory approval).
Beyond the headline though, there are some interesting observations.
First, the deal comes at a price that’s about 10% below Activision’s high from 2021. That’s driving some speculation as to whether another firm could up the bid, but given the deal’s size, that’s somewhat unlikely.
Second, the stock has performed pretty poorly since the announcement. Shares opened near $87 on the news, but have faded more than 8% since the deal was unveiled, with Activision stock most recently closing just below $80.
If it goes through, that leaves $15 a share on the table or almost a 20% gain for bulls.
Wells Fargo (WFC)
January performance: 12.1%
Through the first half of January, the market was rather mixed. Tech was under pressure and most sectors were slipping lower. However, energy stocks and financials were holding up pretty well. Unfortunately though, we lost the leadership from financial stocks once they started reporting earnings.
However, there were a few exceptions and one of them was Wells Fargo.
The stock jumped higher after reporting earnings, but then fell 13% from peak to trough over a five-day stretch where the stock closed lower in each session. Luckily for bulls, the stock was able to rebound and ended higher by about 12% for the month.
Banks stocks are now being closely watched as the Federal Reserve is set to raise interest rates multiple times throughout this year. Markets are currently predicting anywhere from four to five rate hikes this year.
That will help improve the profitability for bank stocks, although the risk to this group is attached to the overall market. It will be hard to outperform on the upside if the whole market is under pressure.
Stocks to Buy: Mastercard (MA)
January performance: 7.5%
Last but not least is Mastercard. If there were any two companies that could reassure investors about the state of the consumer, it’s Mastercard and Visa (NYSE:V). As the whole market was under pressure in late January, these two companies reported better-than-expected earnings.
As a result, the stocks exploded higher by 9% to 10%. They have gone on to grind higher, with Mastercard and Visa handedly outperforming the overall markets so far this year.
But man, I just don’t get what investors can’t like about Mastercard. Analysts expect more than 20% earnings growth this year and next year, along with 16% to 19% revenue growth in each of the next four years.
Visa and Mastercard have both been top-performing stocks over the last decade and I don’t see any reason for that to stop in the long term. Of course, the main risk here is a recession or economic contraction, but if that’s the case, investors will have a lot more to worry about than Mastercard stock.
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.
