Every new year brings new opportunities. It is just one more day in our lives, but it can feel transformative. People resolve to make the upcoming 12 months better than the last and companies can do the same. They have new benchmarks to beat and investors to impress.
In this report we are going to explore 12 companies that are set to have a stellar 2022 and beyond.
First though, let’s take a brief look at the overall market and what it may have in store for investors. Trust me, no one is happier than I am to close the books on 2021, but we’re going to have to do a little looking back in order to align our investing strategies for the year ahead.
What Can 2021 Tell Us About 2022?
When the final accounting was done, 2021 didn’t turn out to be that bad of a year for the overall market. The S&P 500 rallied nearly 29%. Roughly triple its long-term average. Let that sink in.
Despite multiple unknowns with COVID-19 variants, supply chain issues and interest rate anxiety, the market climbed a solid wall of worry.
The fact is that investors made a lot of money last year. And they are sitting on winners. How will they react when the market inevitably hits a bump in the road?
As I see it, the market is priced for a zero-rate world and the Fed seems hellbent on tightening as fast as it can.
The market as a whole looks overdue a steep correction here at 21X earnings. That’s precarious as well as unsustainable. It doesn’t take much of a push to trigger the selling at this level. All Wall Street needs is a sudden shock or even a shudder . . . the Fed doesn’t even need to get involved.
Just look at the headlines that rocked the market in the past year. Many of them were transient in hindsight, but it doesn’t matter.
Interest rates were too high. Interest rates were too low. Inflation was out of control. Supply chains were breaking down. September tends to be a bad month. So does October. COVID remains a threat.
Here we are with the S&P 500 within sight of record territory. Shocks come and go but the bulls always find a way to climb the wall of worry sooner or later.
But that doesn’t mean any of us enjoy buying stocks at levels where it’s more likely that they’ll go down before they go up any farther. I wouldn’t buy a S&P 500 index fund right now.
Sure, the market as a whole can keep edging up, year after year. However, nobody is forcing us to buy the market as a whole.
Keep that in mind when anyone bemoans how overbought or overvalued “the market” is. I think the S&P 500 can eke out another 5-6% in the coming year, but my personal profit target is a whole lot higher.
Start with a sector view. People talk a lot about how insane technology multiples have gotten. They generally mean the companies that came of age in the dot-com era . . . giants like Amazon, Apple, Microsoft and Alphabet.
News flash: only Apple and Microsoft are formally classified as “technology” companies today and they don’t look all that bad. Alphabet and Meta (formerly Facebook) are “communications” stocks now.
And Amazon is lumped in with other retailers in the consumer discretionary sector. It’s a giant, accounting for about 20% of all market capitalization in that group. Tesla is another 20% and then everything else in the consumer world adds up to the remaining 60%, give or take a point.
When people tell you that consumer stocks are priced for utopia at 32X projected earnings, they’re really talking about Amazon (65X) and Tesla (120X) skewing the math through their sheer size and extreme valuations.
Factor them out and the sector as a whole looks extremely cheap relative to what looks like one of the best growth profiles in the economy right now. My math suggests that when you exclude Amazon and Tesla, consumer stocks will raise the bottom line faster than the technology sector . . . and even faster than Amazon itself.
I tell you all of this to make a point that stock performance can diverge from the indexes and buying companies that can buck market trends is what you’ll need to do in 2022 to earn more than low single-digit returns from indexing.
With that said, let’s take a look at the 12 companies that I think can buck market trends in the year ahead.
Align Technology (ALGN) is the maker of Invisalign—the leading clear teeth aligner system, along with other dental products and software. The company had a very strong 2021 after COVID disrupted growth the previous year.
While growth will slow next year from the 50% pace of 2021, Invisalign continues to be the product of choice for orthodontists and their patients over traditional braces. The company is also benefitting from continued growth of iTero scanner used with Invisalign, which greatly enhances practitioner productivity.
Revenue growth is expected to exceed 20% in 2022, and while the stock is not especially cheap at 50X next year’s EPS estimate, the shares offer good relative value which will drive outperformance.
Meta Platforms (FB)—formerly known as Facebook—is looking at nearly 20% revenue growth in 2021 (the books aren’t closed as of this writing) and 19% growth in full year 2022. If these numbers hold, 2021 profits will be at a record level and could be toped this year as Facebook and Instagram remain very popular platforms, and future products related to the Metaverse will add to the appeal for investors.
I believe the bears have thrown everything they could at FB but did not score the knockout. The stock is currently selling at 22X next year’s EPS estimate—its strength and growth potential should demand higher.
Universal Health Services (UHS) owns and operates acute care and mental wellness facilities. There are currently 360 inpatient facilities and 39 outpatient facilities across 28 states, Washington, D.C.; the United Kingdom; and Puerto Rico.
In addition, UHS provides commercial health insurance services.
Companies like UHS experienced decreases in patient visits because of suspension of non-emergency procedures and patients delaying care.
Despite hardships that started in 2020, Universal Health has been well managed by its leadership team which has resulted in earnings surprises in three of the last four quarters. Analysts are forecasting positive sales growth for upcoming quarters as well as 3% growth for 2022. The same analysts have an 8.2% earnings growth rate forecast for each of the coming five years.
These numbers are solid and given that analysts have underestimated this well-run company in the past, these figures could be even better.
Finally, the company pays a modest dividend at 0.62%, but has a history of steady increases in payments.
The stock is currently selling at 10.5X 2022 EPS estimates. This multiple has traditionally been a good entry point for the stock.
Compass Therapeutics (CMPX) is a developmental stage biopharma company that just had its IPO in April of 2021 and began trading on the NASDAQ in November 2021. Before we get into the details of what the company does, it is important to note that the stock has not fared well since its IPO and carries a lot of risk. Shares had been on a volatile decline from the launch until December 28. Since then, the sock has bounced higher despite volume being relatively light.
The reason why this volatile stock is making it to my top 12 for 2022 list is because the company currently has three product candidates designed to limit tumor growth by targeting critical biological pathways. The company’s lead drug candidate, CTX-009 for Biliary Tract Cancers, has completed the first part of a Phase 2A trail, with a partial response in 5 of the 17 patients, and with 16 of 17 patients having a stable disease or a decline in tumor burden. Enrollment in Part 2 has begun, and should this part of the trial be successful, the company could have a lasting impact on patients’ lives and the stock could move significantly higher.
Biomarin (BMRN) has experienced its own bouts of volatility, but the company has been trading since 1999. Some of its current commercial products include Aldurazyme to treat mucopolysaccharidosis I; Brineura for late infantile neuronal ceroid lipofuscinosis type 2, a form of Batten disease; and Kuvan, a proprietary synthetic oral form of 6R-BH4 that is used to treat patients with phenylketonuria (PKU), an inherited metabolic disease.
The shares of this biopharma company have traded steadily all year on hopes for VOXZOGO, a treatment for dwarfism in children over 2. VOXZOGO has been approved in Europe and should soon be approved in the US. Potential sales for the drug are $1 billion annually, compared with the company’s guidance for revenues this year of approximately $1.83 billion, so VOZZOGO would be a major enhancement to the company’s profitability.
This next group of stocks make my list for 2022 because their share prices have become misaligned with their true sales and revenue potential. These are all large cap stocks and I’m sure you are familiar with the majority of these companies.
Let’s take a quick look at each…
Citigroup (C), a bank with a current market cap of $128 billion, is selling at Less than 80% of tangible book value. This figure should grow 5% next year even with dividends and stock buybacks. The company should earn $8.00 a share in 2022 with normalized credit costs. It is hard to see a spike up with U.S. economy in a position of strength as it is currently. The 3.4% dividend only adds to total returns. From a relative standpoint, for C to go down from these prices would indicate severe problems in the economy and markets in general.
Exxon-Mobil (XOM) is an oil and gas company with a $289 billion market cap. Drilling discipline by XOM and other major companies in the space will mean improved cash flow and firmer commodity prices—a double win. Oil prices should remain firm in 2022 with steady demand. The $3.52 annual dividend giving the stock a 5.3% yield appears sustainable in the current oil market environment.
American Express (AXP) is a well-rounded financial services company getting unfairly lumped in with companies like Paypal who are highly dependent on transaction volume to drive revenues. At 17X next year’s EPS estimates, the stock cheap by historical standards.
MarketAxess (MKTX) is a bond trading platform and is setting up for a strong bounce back in 2022. Shares were down nearly 33% in 2021. Historically, the company has realized great growth from its game changing electronic bind trading platform. The company benefits from trading volume and a lack of volatility hurt results in the second half of 2021. However, the Fed tapering and perhaps even tightening should change this is 2022, as higher rates and wider credit spreads will address increased activity.
Adobe (ADBE) is a software giant and the industry as a whole should see strength in 2022. Revenue growth may slow from 20% to 15%, but it will continue to be strong. Adobe dominates the software space for digital content, and I believe market will pay up for leaders even as Fed tightens. At 39X fiscal 2022 EPS estimates, stock is not cheap but good relative to many software peers.
Johnson Outdoor (JOUT) is a manufacturer of outdoor sporting equipment, primarily related to fishing. The company had a strong, long-term pattern of sales and earnings growth until inflation and supply chain issues caught up with the company in 2021. However, with the stock down from a high of over $160 to around $100 a share, the shares have become attractively valued at 13X the current fiscal year’s earnings estimate. Strong and consistent cash flow has given the company a strong and liquid balance sheet, with cash of $240 million greater than ALL liabilities of $216 million.
Foot Locker (FL), a shoe and apparel retailer, has always been a controversial and volatile name. However, buying the dips and trading the shares wisely has always paid off, and I think it will again. Even with supply chain issues, the company should report a strong 2021, earning over $7.00 a share, and customer demand remains strong. Even with EPS likely to decline to $6.50 next year, the stock is incredibly cheap, and aggressive share buybacks are very accretive at the current price.
Keep The Innovative Companies Coming All Year Long
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Here’s a quick look at some of the exciting stocks we’ve been in and out of over the years in GameChangers:
|Ticker||Company Name||% Return|
|SI||Silver Gate Capital||123.36%|
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About Hilary Kramer
Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. The Financial Times describes Ms. Kramer as “A one-woman financial investment powerhouse” and The Economist distinguishes her as “one of the best-known investors in America.” Ms. Kramer is often quoted in publications such as the Wall Street Journal, New York Post, Bloomberg and Reuters. She is a frequent guest commentator on CNBC, CBS, Fox News and Bloomberg, providing investment insight and economic analysis. You can hear her weekly on the syndicated Millionaire Makers radio show.
Ms. Kramer was an analyst and investment banker at Morgan Stanley and Lehman Brothers. Ms. Kramer founded and ran a long-short hedge fund and has been chief investment officer overseeing debt and equity portfolios. Since 2010, Ms. Kramer’s financial publications have provided stock analysis and investment advice to her subscribers. Her products include GameChangers, Value Authority, High Octane Trader, Turbo Trader, 2-Day Trader, IPO Edge and Inner Circle.
Ms. Kramer, a Certified Fraud Examiner, has also testified as an expert in investment suitability, risk management, compliance, executive compensation and corporate governance.
Ms. Kramer received her MBA from the Wharton School at the University of Pennsylvania and her BA with honors from Wellesley College. Ms. Kramer has provided testimony regarding investment policy to the U.S. Senate and is a frequent speaker on the markets, portfolio management and securities fraud and compliance. Ms. Kramer is also the author of “Ahead of the Curve” (Simon & Schuster 2007), “The Little Book of Big Profits from Small Stocks” (Wiley 2012) and the recent Wall Street Journal best-seller “GameChanging Investing: How To Profit From Tomorrow’s Billion-Dollar Trends” (Regnery 2020).