In this article, we discuss the 10 best stocks to buy before 2022.
Global supply chain issues, labor shortages, and business technology investments dominated discussions around growth in 2021. According to an economic forecast by the Conference Board, a non-profit research group, consumer spending patterns are likely to normalize in 2022 and the supply disruptions are expected to improve as the pandemic recedes. The global economy is slated to grow at a rate of 3.9% in the upcoming year, with the United States and China leading the pack with growth rates of 3.8% and 5.5%, respectively.
The growth rates are higher than normal since 2022 is expected to be a breakthrough year for the economy as it slowly recovers from a torrid 2020. The International Monetary Fund expects the world economy to grow by 4.9% in 2022, driven by growth in advanced economies. The Economist Intelligence Unit sees global GDP expanding by 4.1% in 2022 after witnessing 5.4% growth in 2021. Overall, most analysts are bullish on an accelerating recovery.
Some of the top stocks to buy before 2022 include Thermo Fisher Scientific Inc. (NYSE:TMO), Airbnb, Inc. (NASDAQ:ABNB), and Coupa Software Incorporated (NASDAQ:COUP), among others discussed in detail below. Investors eager to pour money into these equities should also carefully consider risks like US-China tensions, cyber warfare, and widespread social unrest that could be likely disruptors to this growth.
Our Methodology
These were picked on upcoming growth catalysts, business fundamentals, and analyst ratings. Hedge fund sentiment was also included as a key classifier.
The hedge fund sentiment around each stock was calculated using the data of 873 hedge funds tracked by Insider Monkey.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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Best Stocks to Buy Before 2022
10. Sarcos Technology and Robotics Corporation (NASDAQ:STRC)
Number of Hedge Fund Holders: N/A
Sarcos Technology and Robotics Corporation (NASDAQ:STRC) markets robotics and microelectromechanical systems for military and industrial purposes. The firm, although small in size, already has a contract with the US Navy for the Guardian DX teleoperated dexterous robotic system. The US Navy recently exercised a contractual option to expand the testing and demonstration of the system. The technology is revolutionary since it performs human-like tasks in challenging conditions, even at height.
Jefferies analyst Stephen Volkmann initiated coverage of Sarcos Technology and Robotics Corporation (NASDAQ:STRC) stock on October 13 with a Buy rating and a price target of $16, highlighting the potential of the firm in developing robotics for non-standard settings. These robots could tackle problems like labor shortages and injuries, the analyst underlined.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Sarcos Technology and Robotics Corporation (NASDAQ:STRC) with 1.5 million shares worth more than $15 million.
Just like Thermo Fisher Scientific Inc. (NYSE:TMO), Airbnb, Inc. (NASDAQ:ABNB), and Coupa Software Incorporated (NASDAQ:COUP), Sarcos Technology and Robotics Corporation (NASDAQ:STRC) is one of the stocks on the radar of elite investors.
9. Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC)
Number of Hedge Fund Holders: 19
Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) is a Swedish firm that markets communications infrastructure. The company is one of the leading providers of 5G infrastructure. As the US government prepares for a massive communications infrastructure overhaul, Ericsson could be one of the biggest beneficiaries of future government contracts to improve 5G connectivity in the country, especially in the context of US skepticism towards Chinese companies in this regard.
On October 8, investment advisory Barclays maintained an Overweight rating on Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) stock and raised the price target to SEK150 from SEK145.
At the end of the second quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $228 million in Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), the same as in the preceding quarter worth $317 million.
8. Akamai Technologies, Inc. (NASDAQ:AKAM)
Number of Hedge Fund Holders: 30
Akamai Technologies, Inc. (NASDAQ:AKAM) provides cloud services for content and business applications. Although it is one of many cloud firms that have promising growth prospects, the firm has recently started marketing a cloud security technology that has received a lot of good feedback from the market, setting it apart from peers. Earlier this month, in the third quarter earnings report, the company revealed that security technology sales had risen 26% year-on-year to $335 million against a total revenue of $860 million.
RBC Capital analyst Rishi Jaluria recently initiated coverage of Akamai Technologies, Inc. (NASDAQ:AKAM) stock with an Outperform rating and a price target of $140, citing the leadership position of the firm in the content delivery network and transition to a security-first ethos as some of the reasons behind the bullish outlook.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Akamai Technologies, Inc. (NASDAQ:AKAM) with 720,065 shares worth more than $83 million.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Akamai Technologies, Inc. (NASDAQ:AKAM) was one of them. Here is what the fund said:
“In the technology sector, we sold our position in Akamai (tkr: AKAM). Akamai has benefitted from higher internet traffic during the pandemic, but we expect the company to face difficult comparable earnings results in 2021 and growth expectations going forward remain low.”
7. Sabre Corporation (NASDAQ:SABR)
Number of Hedge Fund Holders: 37
Sabre Corporation (NASDAQ:SABR) provides technology solutions for the travel industry. Even though the travel economy has improved as vaccinations allow for the resumption of normal service in countries around the world, they are still a long way off from pre-pandemic levels. 2022 could be a key year for the travel industry as pent-up demand results in a mini-boom, some countries only opened international travel in time for the holiday season, and firms like Sabre could be leading beneficiaries of this.
Sabre Corporation (NASDAQ:SABR) is already preparing for the months ahead. It recently introduced the Retail Intelligence suite, a set of tools for dynamic pricing of airfare and ancillaries. This would help enterprise customers adapt to changing market conditions.
At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $972 million in Sabre Corporation (NASDAQ:SABR), down from 40 in the preceding quarter worth $1.2 billion.
6. Zscaler, Inc. (NASDAQ:ZS)
Number of Hedge Fund Holders: 38
Zscaler, Inc. (NASDAQ:ZS) is a cybersecurity firm based in California. The company provides solutions that let users, servers, and Internet of Things devices secure access to externally managed applications. Since internet-related businesses are booming, cybersecurity has emerged as a dominant theme within the industry, especially in the context of hacking and data privacy concerns. Zscaler looks set to benefit from increased enterprise spending on the sector in the next few years.
Zscaler, Inc. (NASDAQ:ZS) recently announced partnerships with Siemens and TD SYNNEX for security solutions and services. BTIG and KGI Securities are both bullish on the stock, with Buy and Outperform ratings, respectively.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Zscaler, Inc. (NASDAQ: ZS) with 1.4 million shares worth more than $318 million.
In addition to Thermo Fisher Scientific Inc. (NYSE:TMO), Airbnb, Inc. (NASDAQ:ABNB), and Coupa Software Incorporated (NASDAQ:COUP), Zscaler, Inc. (NASDAQ:ZS) is one of the stocks that hedge funds are buying.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Zscaler, Inc. (NASDAQ:ZS) was one of them. Here is what the fund said:
“We also exited our investment in Zscaler. Zscaler provides cloudbased Internet security solutions. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Furthermore, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a remote workforce make operating IT infrastructures increasingly complex. Zscaler’s scalable, cloud-based security platform is a more secure and efficient way to connect users and applications, which eliminates the need for several layers of security (firewalls, VPNs, etc.) developed and built over the last couple of decades. While the pandemic crisis is likely disrupting some areas of Zscaler’s new sales funnel, the company is particularly well-suited to scale and accelerate our market share-gain thesis. Ninety percent of employees are remotely connecting to the enterprise IT network in today’s inverted world, as opposed to prior solutions which are geared to support 10%-20% of workers connecting remotely with the rest connecting from within the walls of a corporate network. Many employees have used traditional VPN connections to log into their networks remotely, but Zscaler’s platform offers a more secure connection without exposing an entire internal network, is easier to configure and is less costly to operate at scale. While the trend toward connecting remote devices over the Internet backbone remains firmly in motion, the stock appreciated over 300% in 2020, quickly outgrowing our small-cap market cap mandate, and we ended our successful campaign.”
5. Hologic, Inc. (NASDAQ:HOLX)
Number of Hedge Fund Holders: 41
Hologic, Inc. (NASDAQ:HOLX) is a healthcare equipment firm. The company, which makes and sells COVID-19 testing kits as well, has made smart investments from record profits generated in 2020 and 2021. These acquisitions, according to a bullish analysis on the stock by Evercore ISI analyst Vijay Kumar, are likely to result in a sustained growth profile in the coming months and have been received well at the market.
Hologic, Inc. (NASDAQ:HOLX) also has solid fundamentals. In earnings results for the fourth fiscal quarter, posted in early November, the firm reported earnings per share of $1.61, beating estimates by $0.60. The revenue over the period was $1.3 billion.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Hologic, Inc. (NASDAQ:HOLX) with 2.2 million shares worth more than $149 million.
4. Corning Incorporated (NYSE:GLW)
Number of Hedge Fund Holders: 42
Corning Incorporated (NYSE:GLW) markets display technologies, optical communications, environmental technologies, and specialty materials. The company recently announced that it was expanding a partnership with AT&T, under which Corning will invest $150 million for optical cable manufacturing in North Carolina. The stock will also benefit from increased government spending into communications infrastructure under the American Jobs Plan.
Deutsche Bank analyst Matthew Niknam recently initiated coverage of Corning Incorporated (NYSE:GLW) stock with a Buy rating and a price target of $45, noting that the “differentiated and high-quality products” of the firm were becoming part of everyday life.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Corning Incorporated (NYSE:GLW) with 5.1 million shares worth more than $209 million.
3. Coupa Software Incorporated (NASDAQ:COUP)
Number of Hedge Fund Holders: 54
Coupa Software Incorporated (NASDAQ:COUP) owns and runs a cloud-based platform that offers business spend management services. The firm recently beat market expectations on earnings for the second fiscal quarter and improved guidance. It beat 30% growth estimates and the demand trends for the company continue to improve. Needham raised the price target on the stock to $315 from $280 in September and kept a Buy rating.
Rob Bernshteyn, the CEO of Coupa Software Incorporated (NASDAQ:COUP), told CNBC in an interview earlier this year that the post-pandemic economy would likely increase interest in the product of the firm and that the sales pipeline of the company “was the largest it had ever been”.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Coupa Software Incorporated (NASDAQ:COUP) with 4.6 million shares worth more than $1.2 billion.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Coupa Software Incorporated (NASDAQ:COUP) was one of them. Here is what the fund said:
“We started new investment campaigns in Coupa Software. Coupa is a leading provider of cloud-based business spend-management software. The company helps 1,400 customers process over $2 trillion in annual spend across more than 5 million suppliers. While this quarter’s announcement of a major new customer win at Walmart shows it still has a long runway for growth in this business, we are particularly excited about Coupa Pay—a recently introduced set of cloud services that seeks to process B2B payments (not just invoices) across its large network. B2B payments has seen far less innovation in recent years compared to B2C (PayPal, Venmo, Square), but we see it as a major opportunity in the years ahead.”
2. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 58
Airbnb, Inc. (NASDAQ:ABNB) has several growth catalysts heading into the new year. Improved travel demand for 2022, a surge in vacation travel towards the end of 2021 as restrictions are lifted, and market-beating earnings results released in early November have all helped push the share price up 12% in the past week. Truist, DA Davidson, Wells Fargo, and Loop Capital have all raised the price target on the stock recently.
The stock has room to climb higher in the coming months. Airbnb, Inc. (NASDAQ:ABNB) revealed in the earnings report that it had booked over 79 million experiences in the third quarter, up 25% year-on-year. However, it was 7% below the figure for the third quarter of 2019, before the pandemic upended business, indicating that travel demand was still recovering.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Airbnb, Inc. (NASDAQ: ABNB) with 3.4 million shares worth more than $526 million.
In its Q2 2021 investor letter, Worm Capital LLC, an asset management firm, highlighted a few stocks and Airbnb, Inc. (NASDAQ:ABNB) was one of them. Here is what the fund said:
“Throughout the quarter, you may have noticed that we averaged into a significant position in Airbnb (ABNB). Though the stock has been a relative underperformer since its February highs, we are highly confident about the company’s prospects and its ability to generate meaningful compounded returns over time.
Some history: We have been following Airbnb’s journey for several years, long before the company went public earlier this year. (In fact, nine years ago, in November 2012, Eric profiled the company for Inc.: “Airbnb Is Changing Travel.”)
Whenever we underwrite a new investment, we look for a few key attributes that help us determine the potential long-term value of a business, as well as its risks. In particular, we focus on management (Are they founders? Do they have skin the game? Are they playing the long game?), addressable market size (How big is the opportunity?), its relative growth and creativity to expand (Are they constantly innovating to make the product better for their customers?), margin expansion (Where can we find operating leverage in the model?), its status in the industry (Are they the dominant player? Can they
take market share from incumbents?), business risks (What are we missing? Are customers dissatisfied? What do employees say?) and probably a dozen more elements that are critical to our process. It’s only then do we take out the pencils do the valuation work.
In short, ABNB fulfills pretty much every element of a business model we’re attracted to: First, it’s highly scalable marketplace-based business model that unites buyer and seller with observable flywheel effects. (This is an important observation, in that the platform creates significant economic value for millions of hosts who rely on Airbnb, which in turn attracts new hosts who identify the opportunity, which creates more inventory, which turn attracts more travelers, which attracts more hosts, and soon.) Second, it has a global focus with significant opportunities to expand its operating leverage; Third,
its management—which is still founder-led—stands out to us as long-term thinkers capable of handling crisis, which the team demonstrated throughout the pandemic by dropping operating costs and turning the business into a more efficient, lean organization. (Like Churchill said: “Never let a good crisis go to waste.”)..”
1. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 87
Thermo Fisher Scientific Inc. (NYSE:TMO) markets analytical instruments, specialty diagnostics, and laboratory products. The company has a growing biopharma business, driven by the purchase of PPD, that is expected to continue driving revenue in the coming months. The firm has opened a biologics manufacturing site in Switzerland and recently launched new versions of mass spectrometry and chromatography solutions that were received favorably at the market.
Morgan Stanley analyst Tejas Savant on October 28 resumed coverage of Thermo Fisher Scientific Inc. (NYSE:TMO) stock with an Overweight rating and a price target of $700, appreciating the strong earnings beat of the firm in the third quarter.
At the end of the second quarter of 2021, 87 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Thermo Fisher Scientific Inc. (NYSE:TMO), up from 79 in the preceding quarter worth $6.2 billion.
In its Q2 2021 investor letter, DEVON Equity Management, an asset management firm, highlighted a few stocks and Thermo Fisher Scientific Inc. (NYSE:TMO) was one of them. Here is what the fund said:
“The broad response to the COVID pandemic from the healthcare, pharmaceutical, and life science industries has been nothing short of incredible.
Whilst Vaccine makers understandably garner the highest profile, Thermo Fisher (6.2% of NAV) should be considered one of the outstanding performers, reflected in their ‘COVID related revenue’ hitting US$9.4bn in the 12 months since March 2020 (we appreciate measuring ‘contribution’ to the pandemic by ‘dollars’ generated is a little crude – but ultimately it does tell us something).
Ever the short-termist, Mr Market has looked to the inevitable slowdown in COVID related revenue uneasily – questioning whether it might mean a decline in Earnings come 2022. These concerns resulted in TMO shares declining 5% since their November 2020 peak, the worst performer of our Top 10 holdings.
Fortunately, we look at the COVID dynamic for Thermo in the diametrically opposite fashion.
We think Thermo’s response to COVID has bolstered their competitive positon in multiple verticals, and meaningfully enhanced the long term earnings potential of the company:
Firstly, Thermo came from ‘also-ran’ to leading player in diagnostic testing in 6 months. In ordinary times, this might be expected to take 5+ years. As demand for COVID testing inevitably declines, the capacity Thermo built during 2020 will be filled with demand from non-COVID diagnostic tests, a fast growing area before the pandemic with improved prospects in light of the role testing is playing in the COVID response.
Secondly, Thermo invested heavily…”[read the entire letter here]
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Disclosure. None. 10 Best Stocks to Buy Before 2022 is originally published on Insider Monkey.
