This year has been a tough year for the stock markets including US markets. Through Aug. 17, the S&P 500 is down 10.3%, the Dow Jones Industrial Average is down 6.5%, and the tech-heavy Nasdaq is down 17.3%. Several factors are behind the prolonged recession, including Russia’s invasion of Ukraine and consecutive quarters of negative GDP growth, but the biggest obstacle is inflation. Prices are steadily rising month after month at a pace not seen in almost 40 years. In response, the slow-moving Federal Reserve implemented a series of 75 basis point rate hikes not seen in decades. Let’s see what are the best US stocks to buy in 2022 which are performing in this challenging environment.
Table of Contents
- Top 10 stocks in US markets:
- FAQs: Frequently Asked Questions
Top 10 stocks in US markets:
EOG Resources Inc.
By early 2022, inflation had already emerged as a concern. The year-on-year rate of increase in the consumer price index in November 2021 was 6.8%. A US oil and gas producer chose primarily as a hedge against the risk of continued inflation. Inflation hit 9.1% in June, the highest level since 1981. Benefiting from this year’s key drivers, including the dividend, the stock is up 33.6% by Aug. 17 in 2022, making it the best performer among the 10 picks. In August, EOG reported a 146% year-over-year increase in second-quarter net income and announced a special dividend of $1.50 per share. This is the third special dividend announcement this year.
Grupo Aeroportuario del Sureste SAB de CV
This next name is off the beaten track, but sometimes the best opportunities are out there. Mexican airport operator Grupo Aeroportuario del Sureste was a thematic choice aimed at providing this group of stocks with geographical diversification while at the same time capitalizing on the general incentive for people to travel again. So far so good. Including the dividend, the stock will rise 12.2% by August 17th, 2022. Not surprisingly, total passenger numbers in the second quarter increased by 19.2% from passenger numbers in the second quarter of 2019. This is what ASR uses as the pre-pandemic period for honest comparison. It has a flagship airport in Cancun, Mexico. San Juan of Puerto Rico. Medellín, Colombia, and ASR are benefiting from burgeoning demand in Latin America. Compared to the same quarter last year, traffic increased by 39.3%. ASR stock has a dividend yield of 3.6% and an expected price/earnings ratio of 17.5.
The increase in global travel demand is trending upward, although the share price of credit card giant Visa, which will far outstrip the broader market in 2022, is also roughly flat. In Visa’s accounting third quarter, cross-border travel fell below its 2019 levels for the first time since the outbreak of the pandemic. Cross-border transaction volume increased 40% year-over-year in the prior quarter, with revenues up 19% and earnings per share up 33%. Visa also returned $3.3 billion to shareholders last quarter through share buybacks and dividends.
The most valuable company on this list, the $2.2 trillion big tech giant Microsoft, is the second-best stock to buy in 2022. Despite its size, Microsoft continues to grow steadily, with earnings up 12% in the most recent quarter. Microsoft has many powerful digital products, including the ubiquitous Windows operating system and Microsoft Office productivity software. Recent efforts over the past decade include its $26.2 billion acquisition of LinkedIn in 2016 and the birth of its cloud computing arm Azure, which reported 40% year-over-year revenue growth in its most recent quarter. Microsoft trades at a reasonable premium to the market of about 30 times its revenue. To increase its clout in the lucrative video game industry, Microsoft announced in January that it would acquire video game developer Activision Blizzard Inc. (ATVI), the world’s largest game company for $69 billion.
Another big tech on our list of 2022 Best Stocks is Alphabet, Google’s $1.6 trillion parent company. Shareholders have suffered from a year-to-date decline in share prices, but the company itself continues to perform well, with second-quarter earnings up 13%. CEO Sundar Pichai touted the strength of Alphabet’s flagship search product and the growth of Google Cloud as drivers of results. “Our investments in AI and computing over the years have made our services extremely valuable to consumers and highly effective for businesses of all sizes,” said Pichai. In mid-July, Alphabet conducted a 20-for-1 stock split, making it more economical for the typical retail investor to own all of its shares. Like other detractors on this list, GOOGL has been disproportionately hit as a tech stock in the rising environment.
Lowe’s Cos. Inc.
Lowe’s stock has been named to the list of top stocks for 2022 as it plays in the hot real estate market. But some of this market momentum isn’t reflected directly in the pockets of its LOW shareholders, as rapidly rising interest rates are starting to dampen enthusiasm. Lowe’s second-quarter revenue was $27.5 billion, down slightly from its $27.6 billion in the year-ago quarter. Management blamed a shortened spring sales season as one of the reasons for the lack of recovery in demand. But Lowe’s adjusted earnings per share rose 9.9%, beating analyst expectations, aided by aggressive share buybacks in which Lowe bought back $4 billion worth of shares. The long-term trend clearly favors Lowe, as millennials continue to be homeowners and a nationwide housing shortage is a perennial problem that could lead to more renovation projects. LOW stock is trading at 16x forward earnings.
ASML Holding NV
ASML, a highly rated Dutch semiconductor equipment maker, has struggled with a risk-off attitude and rising interest rates along with other technology and growth stocks, but its business is an elite business like no other in the world. ASML enjoys worldwide exclusivity of extreme UV or EUV lithography machines. This is a very large high-tech machine that etches ever smaller patterns onto wafers used in semiconductors. This niche precision industry has allowed ASML to achieve its 49% gross margin. This is a figure that even Apple Inc. (AAPL) would envy. As a cash cow, ASML has more than quadrupled its payout ratio over the past five years and is still below 40%. The company expects revenue to grow 10% this year, but that figure is artificially constrained as revenue recognition is delayed to 2023.
The $1.5 billion Medifast is the smallest company on the list of top stocks to buy. Medifast is a weight loss management and multi-level marketing company with tens of thousands of vendors known as coaches promoting meal plans and products. MED stock should be considered an absolute value play at current levels, paying a 4.6% dividend and trading at just over 10x the expected earnings. Medifast has been consistently profitable, and this year it has increased its dividend by 15% but has used only 45% of its profits to pay dividends. Inflation and consumer sentiment weighed on results this year, but the company was able to increase revenue by 15% in its latest quarter.
Meta Platforms Inc.
Meta Platforms, formerly known as Facebook, is another big tech company whose stock is struggling under the weight of rising interest rates and a shift from growth to value stocks. But the business itself is also slowing down. In the second quarter, META reported that quarterly sales fell 1% year-over-year for the first time. Additionally, the company expects further declines in the third quarter due to weaker economic conditions and lower advertising spending. Meanwhile, the company is investing billions in the Metaverse in a bold long-term bet that requires sacrificing short-term profits. We expect growth to pick up in 2023, but for the time being there are few immediate catalysts other than the lowest potential price bargain hunters can create by picking up the Silicon Valley star in less than 18 times forward earnings.
Upstart Holdings Inc.
Last and least in terms of year-to-date performance is Upstart, the biggest pick among the top stocks to buy in 2022. Upstart’s goal is to completely destroy traditional credit scoring systems based on scores such as Fair Isaac Corp.’s FICO system. Upstart says its artificial intelligence-based system has demonstrated the ability to predict failure rates with much higher accuracy than FICO scores. But with rising interest rates and a possible recession hitting credit markets, Upstart recently entered the loan holding business, not just rating loans, a move that was ill-timed is proven. The stock may still be a bargain if you focus on doing what you do best and stealing market share from rivals like Fair Isaac, but further fiddling with the credit you own could be too risky.
The best US stocks to buy for 2022:
- EOG Resources Inc. (EOG)
- Grupo Aeroportuario del Sureste SAB de CV (ASR)
- Visa Inc. (V)
- Microsoft Corp. (MSFT)
- Alphabet Inc. (GOOG, GOOGL)
- Lowe’s Cos. Inc. (LOW)
- ASML Holding NV (ASML)
- Medifast Inc. (MED)
- Meta Platforms Inc. (META)
- Upstart Holdings Inc. (UPST)
These are the best pick based on market research & market trends. However, it is advisable for investor to do their own research before putting their savings into these stocks. In short, investing part of your investment corpus into the US market may be a good idea.
FAQs: Frequently Asked Questions
How to invest in US stocks from India?
There are two ways to invest in the US stock market from India: directly invest in equities and indirectly through mutual funds or ETFs.
Is it safe to invest in the US stock market?
Many of the world’s largest global growth companies are listed in the US, including Facebook, Amazon, Apple, Netflix, and Google (FAANG). Profit aside, it’s safer to maintain a diversified stock portfolio.
How much money can I invest in US stocks from India?
Under the Liberal Remittances Scheme (LRS), the Reserve Bank of India (RBI) allows Indian residents to invest up to $250,000 per year in overseas stock markets. How can I start investing in US stocks from India? Investing in US stocks from India is not as difficult as it sounds.
What should I invest in?
The answer to what to invest in depends on two factors: how long it takes to reach its goal and how much risk you are willing to take. Let’s tackle the timeline first. If you’re investing in a distant goal like retirement, you should invest primarily in stocks (again, investing through a mutual fund is recommended).
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