We asked our freelance writers to reveal the stocks they’re looking to buy for 2022. Here’s what they chose:
Stuart Blair: National Express
Although the National Express Group (LSE: NEX) share price has managed to make a decent recovery from 2020’s stock market crash, it is still far below its pre-pandemic price.
But the coach operator is starting to see a pick-up in demand, and its businesses in both Spain and North America have managed to re-reach profitability. This has meant that in Q3 of 2021, revenues were up to 83% on the same period as 2019. I believe that the recovery will continue into 2022, especially as things hopefully return to full normality.
As a more eco-friendly way of travelling than cars, I also believe that National Express is well positioned to combat climate change for the future. This will hopefully be met with increased demand, helping to boost revenues and profitability.
Accordingly, despite the continual risks posed by Covid, I will be adding more National Express shares to my portfolio in 2022, hoping that its post-pandemic recovery can continue. The prospect of a returning dividend is another factor that gives me optimism.
Stuart Blair owns shares in National Express Group.
Rupert Hargreaves: XP Power
My top stock for 2022 is XP Power (LSE: XPP). I think this company offers one of the best ways to invest in the global economic recovery and green energy transition.
The group designs and produces power transformers, including AC-DC power supplies and DC-DC converters. As renewable energy generation capacity expands, it seems likely the demand for these transformers will rise substantially.
Renewable energy sources such as solar and wind produce DC power, but most homes and businesses are wired for AC currents. Therefore, power transformers — such as those produced by XP — are becoming an integral part of the energy system.
Unfortunately, the company is not the only firm in the space. It faces competition from other corporations around the world. This is the biggest challenge facing the enterprise.
Still, despite this risk, I would acquire the stock for my portfolio today. I am excited by its growth potential and its intellectual property portfolio, which could have significant value to a potential acquirer. I would not rule out a possible acquisition as the race for green energy heats up.
Rupert Hargreaves does not own shares in XP Power.
James Reynolds: Darktrace
Darktrace (LSE: DARK) has been in the headlines a lot since it first went public earlier in 2021. It saw some of the most volatile price action of any UK company, pushing it quickly up into the FTSE 100. But what goes up must come down, so the saying goes, and sentiment seems to have soured on Darktrace since the share price corrected in late 2021.
Irrespective of this, sales and revenue have remained strong, and the company is projected to grow by a further 38% over the next year. It seems that customers are eager for the service.
Cybersecurity is proving vital for the modern world. More than 88% of US businesses suffered a data breach in 2020 and one was successfully hacked every 16 seconds. Darktrace is providing adaptive security on a subscription model, which I believe will come to serve it well over the long term. The longer a customer uses Darktrace, the more entrenched it will become in that customer’s IT ecosystem.
The Omicron flash crash pushed the share price to its lowest point since July. For as long as it remains low, it looks to me like the perfect time to buy.
James Reynolds does not own shares in Darktrace.
Edward Sheldon: Volex
My top stock for 2022 is Volex (LSE: VLX). It’s an AIM-listed manufacturing company that specialises in power cords and cables. Its products are used across a number of markets including the electric vehicle (EV), data centre, and healthcare industries.
There are several reasons I’m bullish on Volex. One is that the company is seeing very strong growth in its EV component segment. For the 26 weeks to 3 October 2021, EV market sales were up 210% to $45m, boosted by the global rollout of EV charging stations. I expect growth here to remain strong in 2022 as charging stations continue to be installed around the world.
Another reason I’m bullish here is that the company looks well placed to benefit from the recovery of the healthcare industry. Covid-19 placed a tremendous amount of pressure on healthcare systems in 2020 and 2021, resulting in lower spending on medical technology. In 2022, I’m expecting spending to bounce back as hospitals move to address the backlogs that have built up during the pandemic.
There are risks to consider here, of course. One is supply chain issues. Another is competition from rivals.
Overall, however, I think this stock looks very attractive at its current valuation.
Edward Sheldon owns shares in Volex.
Niki Jerath: Rolls-Royce
The share price of Rolls-Royce Holdings (LSE:RR) has been volatile in 2021, but it’s worth remembering that prior to the Omicron mini-crash in November, the stock was trading near a 12-month high. This reflects the newfound positivity around the business following the pandemic.
I could be wrong, but it wouldn’t surprise me if the share price got to 180p next year.
First, it used the pandemic as an opportunity to cut costs and shore up its balance sheet. Second, it has now secured UK Government backing for its small nuclear reactor business. Third, its P/E ratio is very low. It’s one of the lowest in the FTSE 100. I feel it could be substantially undervalued.
The biggest risk to the business may be if airlines do not recover. Despite the Omicron scare, I hope that in 2022 air travel will increase substantially. The core business is still building and maintaining aircraft engines and is likely to benefit if it does.
Rolls Royce is still a bastion of British industry and a byword for quality. I am largely optimistic for the stock going into 2022.
Niki Jerath does not own shares in Rolls-Royce.
Dan Appleby: Games Workshop
The Games Workshop (LSE: GAW) share price has been volatile this year. At one point it was sitting at an all-time high, which meant the company was almost knocking on the door of the FTSE 100 index. But as I write today, the stock has fallen by 17% on a year-to-date basis.
The share price weakness came after a trading update in which management said the company had seen pressure on freight costs. This is a key risk to consider for next year as Games Workshop continues to grow internationally.
I view the current supply chain issues as temporary, though. Management also said that sales continue to grow, which I think is key. This is because the previous year marked a major release of its flagship game. The fact that sales have grown again makes me think the company has excellent momentum heading into 2022.
With an expanding customer base and greater use of its intellectual property through licensing deals, I view the recent weakness as a buying opportunity. I expect Games Workshop stock to outperform in 2022.
Dan Appleby owns shares in Games Workshop.
Zaven Boyrazian: XP Power
2021 has been quite a tumultuous year for investors. Disruptions have been commonplace throughout most industries, with the pandemic wreaking havoc across supply chains. But despite this, the world is still shifting into a new technological era.
Renewable energy, robotics, and 5G telecommunications are just some sectors that have received enormous levels of new investment. And that’s something that has dramatically benefited XP Power (LSE:XPP).
The firm manufactures power converters for electrical appliances. That may not sound particularly exciting. But the technology is a core component for machines in the industrial, healthcare and even semi-conductor industries. In fact, revenue generated from the latter sector alone surged by 86% in 2020!
As encouraging as this level of growth may be, it doesn’t come risk-free. The electronics industry is highly competitive, with relatively low barriers to entry for low-voltage solutions. As such, the group may struggle to retain its pricing power for some of its products in the future.
Having said that, XP Power seems to be faring well against its competitors so far. And with the demand likely to keep rising for the foreseeable future, XP Power is my top stock for 2022.
Zaven Boyrazian does not own shares in XP Power.
Christopher Ruane: Safestore
Although it had a stellar run in 2021, I reckon there continues to be substantial upside in Safestore (LSE: SAFE). I recently opened a position in the self-storage operator after watching its performance from afar for a while. Self-storage demand has grown in the UK but, based on the US market as a comparison, there continues to be significant space for growth. As a proven operator with an established brand, I reckon Safestore can be one of the beneficiaries of that.
One of the reasons I think the shares could continue to climb in 2022 is their relatively low valuation. Even after hitting an all-time high in December 2021, the shares still traded at a price-to-earnings ratio of around 12. I regard that as cheap for a company with Safestore’s growth prospects. Its most recent quarterly revenue grew 19% compared to the prior year.
Risks include any drop off in demand for self-storage, and the relatively low barriers to entry in the industry. That could lead to more price competition and hurt profits. For now, though, I am optimistic about the outlook for Safestore stock in 2022.
Christopher Ruane owns shares in Safestore.
Nathan Marks: JD Wetherspoon
Following a bleak period for pubs, the market cap of JD Wetherspoon (LSE:JDW) has almost halved since December 2019. After two years of disruptions and suffering, Wetherspoon is my stock pick for 2022 based on optimism of an economic recovery.
Covid-19, supply chain disruptions and inflation could unfortunately persist. However, Wetherspoon has a strong brand name, loyal following and a pre-pandemic history of steady sales growth. It has long been a solidly run business and can thrive again as we hopefully leave the pandemic behind us. If we can avoid any lockdowns or tightening of restrictions, there are more headwinds for the pub chain. Specifically, a 5% cut to the tax on pulled pints. That is the largest beer duty cut in 50 years and could help offset rising input costs, keeping prices low. And with a focus on affordable food and drink, it could continue to attract customers even if inflation rises further.
I think the stock looks cheap at the time of writing, trading at under 900p per share following fears of the spread of the Omicron variant. With the right market conditions, though, the share price could test the 1,600p level not seen since January 2020. Cheers to that!
Nathan Marks does not own shares in JD Wetherspoon.
G A Chester: Whitbread
I think Premier Inn owner Whitbread (LSE: WTB) has outstanding growth prospects for 2022 and beyond. It still has plenty of scope for growth on home soil, but also has a huge opportunity to replicate its UK success in Germany.
The pandemic has taken capacity out of the market, and with surviving competitors more financially constrained, Whitbread can take advantage. The company also believes it’s “better placed than most to deal with the challenging operating and inflationary environment (wages, utilities).”
Reporting on the six months to 26 August, management said Premier Inn’s recovery was ahead of expectations. It trumpeted a “significant market outperformance” in the UK and “expansion continuing at pace” in Germany.
There’s a risk pandemic developments over the coming months could yet set back the recovery and hold back Whitbread’s share price. But with management “confident on the return to pre-pandemic UK profit margins” at some point, and “confident in our ability to execute acquisitions at good returns in Germany,” the stock is currently at the top of my shopping list for 2022.
G A Chester has no position in Whitbread.
Harshil Patel: Diageo
My top stock for 2022 is global drinks giant Diageo (LSE:DGE). It has a long history of building successful drinks brands around the world. It owns a collection of over 200 brands, including highly successful names such as Johnnie Walker, Smirnoff and Guinness.
I think 2022 could be full of many uncertainties. As such, I’d like to own strong, stable and relatively defensive businesses. I’d say that Diageo fulfils these criteria.
It also benefits from several trends that could make it a long-term winner. Rising populations and incomes in several developing countries are sources of growth. In addition, Diageo expects an extra 550m consumers to come of age this decade.
Diageo is also relatively counter-cyclical, so it should perform reasonably well whether the economy is strong or weak. With so many uncertainties regarding the pandemic, I certainly value this characteristic. That said, it will need to look after its brands to maintain popularity. Competition is strong so it will need to stay alert to maintain its pricing.
Overall, Diageo is a quality, defensive consumer company. And I’d be more than happy owning it in 2022.
Harshil Patel does not own shares in Diageo.
Royston Wild: SSE
There’s never a perfect time to buy shares. There are always some economic, political or social problem that’s threatens to sink global stock markets. It’s my opinion, though, that the litany of risks as we head into 2022 — from the enduring public health emergency and rocketing inflation to the rapidly slowing Chinese economy — mean investors like me probably need to be extra careful right now.
This is why I think SSE (LSE: SSE) could be a top stock to buy for next year. Electricity’s one of those essential commodities that remains in high demand irrespective of broader economic conditions. Therefore power generators like SSE can expect revenues to remain stable in 2022 even if the world economy goes for a bath.
I also like SSE from a long-term perspective. The FTSE 100 firm has made green energy a cornerstone of its growth strategy and it plans to treble output from renewable sources between 2019 and the end of this decade. This should pay off handsomely as low-carbon electricity gains in popularity. I’d think SSE’s a top stock to buy for 2022 despite the unreliable nature of wind power and the subsequent danger this poses to the energy producer’s top line.
Royston Wild does not own shares in SSE.
Roland Head: Centrica
Gas prices and energy supplier failures have made headlines in 2021. I reckon that British Gas owner Centrica (LSE: CNA) could be one of the biggest winners from this crisis
Unlike smaller rivals, Centrica has a solid balance sheet and has hedged its supply contracts to make sure it doesn’t lose money on price-capped deals with consumers.
By taking on the customers of failed firms such as People’s Energy, British Gas has also been able to add more than 400,000 new domestic customers. This has helped to reverse the customer outflows seen in recent years.
As one of the largest players in the utility sector, Centrica is helping to shape new rules aimed at preventing a repeat of supplier failures we’ve seen in 2021.
I expect larger firms such as British Gas to emerge stronger from this crisis. Indeed, I expect economies of scale and value-added services such as boiler maintenance drive a return to growth.
Centrica shares are currently trading on less than 10 times 2022 forecast earnings and offer a forecast yield of 4.6%. I can see plenty of room for further share price gains, supported by higher profits.
Roland Head does not own shares in Centrica.
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The Motley Fool UK has recommended Diageo, Games Workshop, and XP Power. 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.