2022 is shaping up to be an interesting year for the UK stock market. Interest rates and market uncertainty are on the rise. It can seem like nowhere is a safe place to allocate capital. All investing comes with risks, but I believe these FTSE 100 companies will not only shelter my investments but will continue to outperform the market through 2022.
Cyber security winner
My first pick from the FTSE 100 is Darktrace (LSE: DARK). This Cambridge-based cyber security company made waves early this year when it first went public. The share price then skyrocketed from 330p in April all the way to 945p in October. It has since pulled back to 529p after some analysts argued that the company was overvalued. Early backers of the company are also now being released from their vesting clauses (rules on when they can sell shares). While there has been no large-scale sell-off this news has slowed the share’s parabolic rise.
I however think that the outlook couldn’t be better for Darktrace. The need for cyber security is only increasing. On average in 2020, a business was successfully hacked every 16 seconds and 88% of businesses suffered a data breach. Despite the share price pullback, sales and revenue remain strong. The company’s subscription model also means that as time goes on it will only become more entrenched in its customers’ businesses.
My next pick is Imperial Brands (LSE: IMB). The Bristol-based tobacco company is currently undergoing a long reorganization process that aims to cut costs and boost revenues in its most successful markets. Already this has started to pay off. Higher product prices have increased profits for the year and savings made by exiting the Russian and Japanese markets have amplified those earnings.
Of course, tobacco products are growing less popular each year in the UK and the US. Younger generations are far less likely to take up smoking and those who do smoke less frequently. This is of course excellent news for public health and is driving Imperial Brands to refocus on healthier options like e-cigarettes. However, it is worth noting that tobacco remains popular in Spain and Germany, two of IMB’s other key markets. I think that Imperial Brands has shown great resilience over this difficult time will continue to reshape its business to benefit shareholders in 2022.
My third FTSE 100 pick is Rolls-Royce (LSE: RR). The aeronautics engineer and manufacturer has had some difficult years recently, even accounting for the pandemic. As a manufacturer of high-quality machinery, Rolls-Royce has very high operating costs which can easily cut into profits in slow years. But the company which developed the Spitfire engine has struck gold with several new military contracts in both the US and UK. These contracts are only temporary now, but one with the US Airforce has the potential to be worth more than $2.6bn. I am also impressed with how it continues to reinvest those profits and develop new revenue streams. Modular modular nuclear reactors anyone?
The outlook seems bright for Rolls-Royce in 2022.
All three of these companies have risks involved, but they each cover different sectors and have very different benefits. Rolls-Royce has the chance to strengthen its relationship to valuable government institutions. Imperial Brands pays a hefty dividend and, as a tech company, the sky’s the limit for Darktrace.
I will be adding all three to my portfolio very shortly.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.