There is no question that the S&P 500 has gotten off to a slow start in 2022. Down 8.94% year-to-date (YTD), investors are worried geopolitical issues along with rampant inflation will bring the economy to its knees. As a result, there are fewer S&P 500 stocks to buy that are headed in the right direction.
According to Finviz.com, approximately 345 out of the 505 stocks in the index are down YTD. Of those 345 companies, 210 are down double digits through the first two months in 2022.
It is fair to say that momentum stocks are in the doghouse at the moment. Nowhere is that more true than in the technology sector. Of the 71 tech stocks in the index, 62 are down YTD. Over the past 52 weeks, things are a lot better with only 20 down out of 71.
Despite the appearance that momentum stocks have lost their way, the reality is that 78 stocks are trading within 5% of their 52-week highs.
Here are 10 best S&P 500 stocks to buy now:
- Nucor Corporation (NYSE:NUE)
- O’Reilly Automotive (NASDAQ:ORLY)
- Dollar Tree, Inc. (NASDAQ:DLTR)
- The Hershey Company (NYSE:HSY)
- McCormick & Company (NYSE:MKC)
- EOG Resources (NYSE:EOG)
- Loews Corporation (NYSE:L)
- Henry Schein (NASDAQ:HSIC)
- Deere & Company (NYSE:DE)
- Boston Properties (NYSE:BXP)
S&P 500 Stocks to Buy: Nucor Corporation (NUE)
As I write this, the North Carolina-based steel producer is coming down from a 52-week high of $140.25. It currently sits at $131.89. It is up 15.5% YTD and 109.5% over the past year. Commodity stocks have been hot in 2022. That is a side effect of geopolitical conflict.
In Sep. 2021, I recommended 10 stocks to buy that were down, but not out. One of them was Nucor. At the time, it had a relative stock index (RSI) of 18.6. Stocks with an RSI below 30 are considered oversold by investors. Since my article, NUE stock is up 38% in the five months since.
When I recommended Nucor in September, it had a trailing-12-month (TTM) free cash flow (FCF) of $1.76 billion. Today, it is $4.61 billion. So, despite the fact that NUE stock has gained 38%, its FCF yield is 12.5%, almost double what it was in September.
It is safe to say this business is on fire.
O’Reilly Automotive (ORLY)
The retailer of aftermarket automotive parts has a 52-week high of $710.86. It is actually down 5.7% YTD, but up 42.8% over the past year. Over the past five years, it is up 147.21% on a cumulative basis. It is definitely a stock to buy and hold forever.
In October 2021, I included it in a list of companies making billion-dollar stock buybacks. Since 2011, it has repurchased more than $15.5 billion of its stock, delivering a compound annual growth rate of 12.7%. Not all buybacks are nearly as successful.
While I’m often dismayed by how poorly companies execute share repurchase programs, when done right, they can be effective. More importantly, buybacks are a sign of an outsized FCF generation.
There is not much else to say about O’Reilly except that if you own the stock for the long haul, you are not likely to be disappointed. It is a five-star stock in my opinion.
S&P 500 Stocks to Buy: Dollar Tree, Inc. (DLTR)
The discount retailer has a 52-week high of $149.37. It is up 1.44% YTD and up 36.9% over the past year. The company continues to try to turn the page on its nearly $9 billion acquisition of Family Dollar Stores in 2015. It seems no matter what it does, bad luck seems to follow the chain.
The most recent problem is a potential boycott because of the unsanitary conditions found at many of its Family Dollar locations in six southern states. The company was forced to close more than 400 locations in late February because of the situation.
Dollar Tree has responded to consumer complaints by temporarily closing the stores, removing recalled products, and sanitizing the shelves, floors, etc. I’m sure this problem will pass.
In the meantime, the company rolled out its new baseline pricing of $1.25 to a warm response from customers.
“Our shoppers have been very supportive of the change, confirming that consumers continue to choose Dollar Tree for the extreme value our products offer compared to other retailers,” said Michael Witynski, president and chief executive officer (CEO) of Dollar Tree.
In addition, its Dollar Tree Plus stores, which sell items as high as $5, are also doing well. Look for the company’s FCF generation to ramp up in the coming quarters.
The Hershey Company (HSY)
The chocolate and candy manufacturer has a 52-week high of $216.33. It is up 10.7% YTD and up 40.3% over the past year.
In May 2021, I included Hershey in an article covering winning and losing stocks from the previous week. Hershey was one of the names on the winner’s list, up 2.3% at the time. Admittedly, that wasn’t a lot, but CEO Michelle Buck does such a good job running the iconic business, I just had to include it. It is up 59% since.
More recently, I included Hershey in a list of consumer brands ready to hit customers with higher prices. It expects sales and earnings to grow between 8% to 11% in 2022 despite the price increases.
Consumers might have a tough time paying more at the gas pump, but they’ll gladly absorb higher prices for their favorite candy bar.
HSY stock remains an excellent long-term buy.
S&P 500 Stocks to Buy: McCormick & Company (MKC)
The company known for spices, seasonings, and hot sauce has a 52-week high of $107.34. It is up 8.82% YTD and up 24.5% over the past year. If you are looking for a fast mover, MKC probably isn’t your cup of tea. It is one of those stocks you stick in a drawer and forget about.
In October 2020, I picked a group of 10 consumer stocks that I felt could provide investors with a nice mix of defensive positions, like McCormick, with more growth-oriented businesses, such as Nike (NYSE:NKE).
Unfortunately, it was close to its all-time high. As a result, it has gone sideways over the past 16 months. However, I think it is ready to blow through $100.
In January, it reported record sales in 2021. Sales grew 11%, excluding currency, while adjusted earnings per share rose 8%. In 2022, sales, excluding currency, are expected to rise 5% at the midpoint of its guidance. Earnings are also expected to increase 5% in 2022.
It is not a fast grower, but it gets the job done. MKC stock is an excellent stock to own in volatile times.
EOG Resources (EOG)
Like most oil and gas companies, 2022 is turning out to be a bonanza for shareholders. EOG Resources has a 52-week high of $121.77. It is up 32.9% YTD and 73.9% over the past year.
The company’s fourth-quarter 2021 presentation states the following:
“EOG is focused on being among the lowest cost, highest return and lowest emissions producers, playing a significant role in the long-term future of energy.”
I’m not a big oil and gas fan, but it is hard not to like this kind of approach in an industry that is not necessarily known for forward-thinking.
One thing in particular really jumps out at me from its presentation. First, it generated a record FCF of $5.5 billion in 2021, $2.7 billion of which it returned to shareholders through dividends, share repurchases, and even a $1 special dividend. In 2022, it expects $6.4 billion FCF, including the $1 special dividend in March.
Companies that pay special dividends really are special. Even in the tough times, EOG is one of the good guys.
S&P 500 Stocks to Buy: Loews Corporation (L)
This holding company run by the Tisch family has a 52-week high of $63.19. It is up 3.86% YTD and up 19.8% over the past year.
Many would argue that Loews’ best days are long behind it. Co-founder Laurence Tisch acquired 25% of CBS for $800 million in 1986, running the network until 1995. Tisch built a conglomerate that included hotels, cinemas, insurance, tobacco, and offshore drilling.
Capital allocation was Tisch’s specialty. His son, James, is now the CEO. He has been with the company since 1977. He hasn’t been nearly as successful as his father at growing L stock. In 1998, the year Laurence and his brother Preston stepped down as co-CEOs, the company’s shares traded close to $100.
Today, the holding company’s assets include 89.6% of CNA Financial (NYSE:CNA), 100% of Boardwalk Pipelines, 100% of Loews Hotels, 53% of Altium Packaging, and $3.4 billion in cash and investments.
It is a mini Berkshire Hathaway (NYSE:BRK-B) in the best sense.
Henry Schein (HSIC)
The dental, physician, and alternate care distributor has a 52-week high of $88.38. It is up 13.8% YTD and up 33.8% over the past year.
In April 2019, I put HSIC stock at the top of a list of seven dental stocks to buy that would make you smile. At the time, I felt like it had entered into value territory, trading perilously close to $55, a level it had sunk to on only three occasions between 2014 and 2019.
It didn’t drop to $55 in 2019. However, during the big market correction of March 2020, it fell all the way to $45, its lowest point since 2014. It has almost doubled since then.
Business in 2021 was excellent with sales of $12.4 billion — which were 23% higher year-over-year; 16.9% organic — and operating income of $851.7 million, which was up 59%. It expects adjusted earnings per share (EPS) growth of 5% to 9% in 2022.
This is very conservative guidance. Analyst estimates have risen over the past three months. I would be shocked if it didn’t deliver double-digit growth in 2022.
S&P 500 Stocks to Buy: Deere & Company (DE)
The manufacturer of agriculture and other heavy equipment has a 52-week high of $405.49. It is up 9.45% YTD and up 7.28% over the past year.
It is actually trading 5.8% below its 52-week high as I write this, but it is such a good long-term buy, I just had to make an exception. Over the past five years, it is up around 243%.
When you think of John Deere, you think of the big green combines that cut hay. However, it has more than 25 brands under its roof that accomplish all kinds of tasks in the fields and elsewhere.
The company’s fiscal 2022 presentation explains its focus:
“John Deere will deliver intelligent, connected machines and applications that will revolutionize production systems in agriculture and construction to unlock customer economic value across the lifecycle in ways that are sustainable for all.”
Its capital allocation policies are second to none. Between 2004 and 2021, it generated $54.6 billion in cash from its operations. It allocated $4.6 billion to acquisitions, $456 million in net debt reduction, $14.3 billion in capital expenditures, and a $1.4 billion investment into its financial services business.
With its $40.3 billion in FCF, it paid out $11.6 billion in dividends and $18.5 billion in share repurchases. Over 17 years, it paid out 55% of its cash flow to shareholders while adding more than $3 billion in cash to its balance sheet.
This company is as solid as they come.
Boston Properties (BXP)
Who says that owning office buildings is a bad idea? The real estate investment trust owns 201 Class A office buildings in the U.S. It is the largest publicly-traded developer, owner, and manager of Class A properties in America.
BXP stock has a 52-week high of $128. It, too, is slightly outside of the 5% criteria, but it is too good a business to be excluded. It is up 5.4% YTD and up 18.8% over the past year.
Since 1997, BXP has delivered a cumulative total return of 1,208%, 1.6x the S&P 500, and 1.3x the FTSE Nareit All REITs Index.
The REITs top 20 tenants account for just 28.44% of its annualized rental obligations. These tenants have an average lease term of 10.6%. It currently is developing 2.8 million square feet of new office space. These developments are 56% pre-leased. It also has 1.2 million square feet of life sciences buildings under development. Those are 33% pre-leased.
If you are an income investor, Boston Properties ought to be on your list.
On the date of publication, Will Ashworth 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.