It’s a new year, it’s a time for all investors and stock pickers to select a new or old basket of goods to purchase in their portfolios or trading accounts for the year. TRADEPRO Academy has done the same.
Here are our 10 top stock picks for 2022. We have provided 5 picks for our “value” names and 5 picks for our “growth names”. These are based on the innovative expectations, earnings growth, bottom-line profitability growth, and also the external economic effects that may stifle some of the other sectors and equities out there.
First, let’s dive into the overall understanding of where we expect to see the economy and the overall market to understand which sectors we should focus on. I don’t think it’s easy enough to like a stock and just say “this is it for the year”. A trader and investors need to understand which spaces of the market are expected to do better than others.
This year, the S&P 500 had a few surprise top-performing sectors, did you know Energy would be at the top?
The top-performing sectors of 2021 were:
- Real Estate
- Tech and Financials
- Consumer Discretionary.
While the top-performing stocks in the S&P 500 were:
These are names from all types of different sectors, and you can see, out of the top 5, 3 of them were energy names. Up at least 130%.
So what can we expect from the overall market conditions and the economy in the coming year?
Here are things we need to consider:
- The Federal Reserve, they are set to hike rates 3-4 times in 2022. This makes for downside pressure in general markets, some industries more than others.
- The Federal Reserve, there is an asset taper due to increased inflation that was sprung on by an $8Trillion balance sheet.
- There are current supply chain issues and lingering effects of the pandemic affecting companies and their bottom line.
- There is the expectation of slower earnings growth and bottom-line growth in companies.
- We have not seen a pullback in the overall market over 7% in the last year (2021).
In terms of sector analysis and things to consider:
- We have seen a lot of money flow into growth and high P/E names which caused overinflation in those asset prices.
- We’ve seen big tech get a lot of love this year, due to the above, but also considered more of a “safe haven” asset as there were fears of the tapering and inflation having a negative impact on growth and tech names.
- A sector rotation into “defensive” names, which include a lot of DOW names. HD, COST, WMT getting a lot of love.
- Sector rotations into “late cycle asset classes” which are utilities and consumer staples over the last 1-2 months.
- Money flowing in energy due to an expected increased demand due to travel increase and covid fears starting to subside.
- Money flows into metals, and certain precious metals that are more inflation resistant but also are in high demand, low supply.
We would say the top sectors we want to focus on in the coming year are going to be:
Now anyone can make a case for a lot of things, like big tech and “safe tech” is to be considered in the mix, which we do agree on. However, this is written with the assumption that people are already long for big tech like AAPL, MSFT, FB, GOOGL and NVDA. Along with some other names that are included in a lot of our research on our website. The names that are broken down in the coming sections are going to be based on which names we think have the highest potential in 2022 to GROW.
Here are our top 5 value picks for 2022.
1. Exxon Mobil Crop. XOM)
This is an energy name that belongs to the SPDR XLE sector (oil & gas) XOM is the largest holding at 22% of the whole sector, a close second is Chevron Corp. (CVX) There are high expectations for oil in the coming year, as we saw it got hurt badly in 2020 and somewhat of 2021 because of the rising demand fears due to a global lockdown and pandemic. XOM may not have the strongest growing EPS, however, the fwd P/E ratio is favorable at 10.77.
Overall the name has big potential on the anticipated increase in oil prices and demand coming back to the market. When we start to see travel start coming back, we are going to see some love in these energy names. The idea is that oil continues to run, and we could potentially see $100 oil, which could really pump XOM. Before the COVID dump, XOM was trading around 67, we dropped about into 32. From here we’re up nicely, but the highs are still out of reach above 100.
Currently, XOM is priced at 65.90.
We have a position in our trading community already from the starting point of the year. 61.80.
There are a few levels to consider
Support: 61.80, 58.30, and 46.04. Ideally, we don’t see that third support.
Resistance: 67.65, 76.10, 88.55
Our target for the year is 80-85. Which would represent approximately a 33% gain on the asset. If we can extend past 88.55 and demand rockets on oil, we can see 100.
2. Disney (DIS)
This is a classic name, we’ve seen a strong run post-2020 dump from about 85 in to 200 in a year’s time before we started to see the downside and dump as we have seen in a lot of names at the end of 2021. This is a good name that has growth potential and earnings potential, it is more of a boring name for sure. However, we saw a bad earnings period that sent us from 175 down to 142 in a few week’s time. Now we’re trying to get back at it. DIS released DIS+ which is competing with Netflix. The main issue they’re currently facing is a lot of closures of their theme parks due to COVID restrictions around the world. Which is causing issues. DIS still has a high P/E ratio while the forward P/E is not bad, just under 30. Earnings this year are up 170% While next expected to grow to a slower degree of 37%. Many analysts are very bullish on DIS going into 2022 with price targets between 200-220. We can see something of the sort shaping up.
Current DIS price is 155.80.
We do have a position already in the TRADEPRO academy community, in anticipation of the move back above 170-180 in the coming months.
We have a few levels to consider:
Support: 153.40, 149, 142.
Resistance: 164.20, 169.45, 180.15
3. Walmart (WMT)
Walmart is at the top of our list for 2022, this is because we have seen what defensive names are. Look at what COST did in 2021, the name is up about 50%. So much for a “boring” name. These defensive names have really good potential. Walmart is a name that has been around forever and will continue to be around for a long time. We think that once they decide to increase their profit margins even slightly we will see a huge explosion out of the overall range. Currently, the forward P/E is fairly solid sitting at 21.55. Along with EPS growth next year, even though small. There is a lot of potential in the name.
The current WMT price is 142.00.
We have a position from a little lower. There are some key levels in which we can find some long opportunities. A very nice demand base has formed. From here we would want to see the breakout to the upside in WMT and through the resistance of 153.60 for the explosion.
Support: 136, 125 (don’t really want to see it under here)
Resistance: 146, 153.60, then new highs.
We are looking for a move into 180-200 this year on WMT which is a 34% gain from the current level.
4. Goldman Sachs (GS)
Goldman Sachs is one of the largest financial institutions in the US. It was between this and JPM. Now we can go the easy route and look at XLF which is the financials ETF that allows us more exposure to these names. However, I do like GS a little more. It is a little more expensive, however, the trend in GS is a little more stable in market price, as the pre-tax earnings and EPS grew more than that of JPM. By a smaller margin, however, it still outperformed. We are currently in an extremely low rate environment and these names are still doing well. This is a play on the expected rate hikes to come in the next year. We are anticipating 3-4 hikes in 2022, which will allow financial names to benefit from that in terms of their bottom lines. GS has a strong forward P/E of 9.88 as well as solid EPS growth expectations.
Current Price: 405
GS is up about 50% in 2021 and up 190% from the 2020 lows. I like the following levels on GS:
Support: 389.20, 366.70
Resistance: 415.45, 425.85, 457.45
We do like GS into 500-550 this coming year should this trend persist. It’s not a drastic gain, but sitting around 30% potential.
5. Freeport-McMoran (FCX)
This is a precious metals company, they are miners, which is a little concerning because mining companies don’t necessarily move with the precious metals prices. Overall this name does stick out to us because they focus on copper. And we anticipate there will be a larger increase in copper demand in 2022. We are looking at this as a building materials play and infrastructure play all in one. We have ranged for quite a while in this name but overall we’re sustaining the upside well. Just in time for the next leg higher. The name has a solid P/E ratio and even better forward P/E of 11.68. The financials look solid on the name for the next leg higher. With EPS this year of 345% and expected EPS to continue to grow next year. We like this name in 70-76 into the EOY. Inflation fears can put upside pressure on precious metals and metal names.
Current Price: 42.15
Here are some key levels to watch out for in FCX.
Support: 39, 36, 31 (don’t really want to see price under this level)
Resistance: 44.35, 49.35, 56, 64
The ATH on this name is still a long way away. We’re looking for a move into the 65 ATH.
CRM is a larger tech name that we have to consider because this is one of the names Nancy Pelosi actually bought DEEP ITM options on. She is considered to have made substantial gains in the stock market and her plays pan out really well. Not to mention this name has a lot of potential for upside as it is one of the names that got beat up throughout the end of the year. There is good potential in the innovation of the name and the fundamentals are strong as well. This name is overall still a little overvalued and we would want to see strong earnings growth in it this year. The fwd P/E ratio is 53 which even for tech is fairly high. This year this name ran from about 215 to a high of 312 before turning around. Typically the name does range a lot overall so I wouldn’t be surprised to see a range form.
We are looking at the following levels:
Support: 237, 229, 205
Resistance: 261, 276, 311
We don’t really want to see the price under the 229 support should it keep falling.
Growth Companies for 2022
Growth companies have had a lot of worries into the second half of 2021. These names got exposed with their high multiples, low earnings, or low profitability on inflation fears. Generally, money flowed out of these names in fear that the market was peaking out.
Taking all of this into consideration, these names are typically invested in with the anticipation that we’re going to see their innovation lead prices higher. Growth companies dropped hard as money flowed out of those names and into other names that provided more “value”
Sea Limited (SE)
Sea Limited did very well in 2020-2021 into about the end of 2021. Now currently off about 47% from highs. We experienced a run of about 910% from the lows of the March 2020 drop in the market. So the pullback that we’ve seen isn’t THAT drastic in retrospect. However, it’s a lot in a single few months. We have broken a lot of support structures. SE has posted a negative PE ratio as well as negative earnings in 2021 meaning that the bottom line hasn’t even turned positive in the name, however people are paying this much for shares. The company has not turned a profit, unfortunately, if that changes in the next year, there will be good potential in this name. The company is an Asian global consumer internet company that has about 3 businesses. Digital entertainment, eCommerce, and digital payments/ financial services. The potential is there. We are looking for the 190-195 area to hold to see a lot of buyers step in again, otherwise can see prices into 140.
Price is currently sitting at 197.80
Here are some levels we’re looking at:
Support: 190, 172, 140
Resistance: 228, 260, 285
This was one of the most popular names over the last few years, running from $4 to 65+. This is a Chinese EV company that has huge potential. However, China has been stifling the gains in the stock market with a lot of bad news emerging. Not to mention the SEC trying to cut Chinese ADR out of the stock market. They’re moving into Europe with their electric cars. The cars look pretty cool and if they can infiltrate the world then the potential is really high. There are some bugs in terms of the battery changes but overall they’re delivering well. EPS was about 57% this year with an expected growth of about 84% in the coming year.
Price is currently sitting at 31.60
On a technical scale, NIO has formed a large descending wedge type pattern with the potential to make the next leg up and see price open up the longs if we do break above 40 or so. That is not in the current cards. As long as we can hold the 27 areas I think NIO can attempt the next leg higher.
Support: 27, 23
Resistance: 33, 37.50, 42.50, 46.70
Marathon Digital Holdings (MARA)
MARA is a growth name, closely tied to the BTC and crypto movement. This name is on the list because of the anticipation that crypto does make a move higher, especially BTC into the 100-150K region. They’re a patent-holding company and known for purchases of BTC and BTC mining equipment. The name is very volatile and makes large swings up and down. Right now as it stands the forward P/E is also favorable at about 7.35 and the earnings expectations next year are over 2000%. This is a solid growth name with solid fundamentals as well.
Current price: 34.15
We have key support structure at: 31.75, 25
Key resistance is sitting at 40, 44, 52, 58, 73
We think this name can move into the 100 area with BTC on the rip, if you look at the price action of BTC compared to MARA it’s very similar to the next large bull run that crypto has, MARA will explode as well. We hit over 80 this last year on MARA.
Block Inc (SQ)
Previously known as Square, Block is a payment company that is known to rival PayPal but to take a more “modern” approach, in looking to take in crypto as well. This company was founded by Jack Dorsey, the founder of Twitter and he is currently CEO. The thing with Block is that Jack Dorsey is an unfavorable CEO we saw that in Twitter as well and a lot of this recent downside is not mainly due to him but he doesn’t make it more attractive to investors. This company has huge potential and it is a growth name, but we need to see more consistent growth in revenue and profit for the upside to hold out on the name. We really quite a lot since the large P/E and growth rally in that sector from 2020. We reached a peak of about 285 almost rivaling the PYPL prices. The P/E is still 165, with fwd P/E 85.60 which is better, just needs more earnings. Overall the EPS this year were negative but expected to be positive next year. EPS has been positive in the past.
Current price: 156
Support: 155, 130
Resistance: 170, 192, 220
Unity Software (U)
Fairly recent IPO, pretty volatile name, but overall strong potential in the name itself. This is a software company that has a larger piece in the metaverse plays that we have been watching for a while now. Unfortunately, U is another name that is not profitable yet, they have increased revenue and growth but the net profit is just not there. If that changes then this name is going to look pretty solid. Along with NVDA, FB, RBLX, MSFT, Unity is one of the top 5 in the Meta ETF that was recently released by Roundhill investments.
We do like the potential of U back to 200+ but we would need to see more profit come through the name which would attract more investors.
Current Price: 129
Support: 129, 117, 100, 80
Resistance: 155, 181, 210
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