The 15 Best Stocks to Buy for the Rest of 2022
The lesson of the past two years: Be ready for anything. Our 15 best stocks to buy for the rest of 2022 reflect several possible outcomes for the second half of this tumultuous year.
We're near the midway point of 2022, and this year is shaping up to be a lot different than most investors had expected. And that means, as investors look to retool their portfolios with the best stocks for the rest of 2022, they'll have to take a somewhat different tack than they did at the start of the year.
The optimism following strong returns in 2020 and 2021 has given way to bear market angst. All major U.S. indices crossed into official bear market territory in the first half of 2022.
As for the reasons? "Pick one!" says John Del Vecchio, co-manager of the $140 million AdvisorShares Ranger Equity Bear ETF (HDGE), an actively managed exchange-traded fund (ETF) specializing in short selling. "When we entered the year, stocks were expensive. We had a new generation of traders in the game who have never seen a bear market and thus had no understanding of the risk they were taking. We had new tech companies with shaky business models supported by cheap money. And we had inflation bubbling up, guaranteeing that the Federal Reserve would have to tighten monetary policy. Given those conditions, a bear market was inevitable."
But as we look to the second half of the year, have those conditions changed? And might there be some value in the wreckage?
"We're seeing incredible opportunity here," says Sonia Joao, chief operating officer of Robertson Wealth Management. "Some of our favorite growth names, particularly in technology, are trading at prices we never expected to see again. And some of our favorite income plays are sporting their highest yields in years."
Today, let's take a look at 15 of the best stocks to buy for the second half of 2022. Some of these will be familiar household names, but others will likely be new to you. But all, for one reason or another, are well positioned to benefit from a recovery in the second half of the year.
Data is as of June 20. Stocks listed in reverse order of yield. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
- Industry: Internet retail
- Market value: $1.1 trillion
- Dividend yield: N/A
Amazon.com (AMZN, $106.22) made news this year by undergoing a 20-for-1 stock split. But the optimism of that announcement has quickly faded as the shares have slumped. AMZN stock is now trading by more than 40% below its all-time highs and has given back most of its COVID-era gains. The shares are only marginally higher than they were in the summer of 2018, four years ago.
But here's the thing: This isn't the first time Amazon has taken a tumble. The shares dropped by more than 30% during the late 2018 market correction and lost a quarter of their value or more in 2011, 2014 and 2016. And then, of course, there was 2008, where the shares lost nearly two-thirds of their value.
Every time Amazon hit a rough patch, it came back stronger. Naturally, today's Amazon is a larger, more mature company than the brash internet startup it used to be. It's also struggling with growing pains typical of a company its size, such as labor unrest and political pressure.
But let's ask ourselves a couple questions: Do you buy more or less on Amazon today than you did five years ago? And do you expect that you'll be buying more or less five years from now?
Apart from being the leading internet retailer, Amazon remains the No. 1 player in cloud computing servicers via its AWS platform.
The shares trade at 2.3 times sales. That's marginally lower than the S&P 500, at 2.4. However, while that's not "cheap" in a traditional value sense, it's a six-year low for Amazon ... and that might be an attractive entry point in what could be one of the best stocks to buy for the rest of 2022.
- Industry: Internet content and information
- Market value: $1.4 trillion
- Dividend yield: N/A
Alphabet's stock split has received a lot of media attention. But the split, while potentially making the shares easier for smaller retail investors to own, is more of a sideshow. The far more compelling story is that of a wildly profitable technology giant trading at a deep discount to its recent highs.
GOOGL's shares are down by about a quarter from their late 2021 highs and were recently down by just shy of a third. This erased more than a year's worth of gains.
Even after the tumble, Alphabet's shares are not "cheap" in strict value sense, as they trade hands for over 5 times sales. But that's down considerably from a price-to-sales (P/S) ratio in the 8s over the past year or so. And if there was ever a stock to justify a multiple like that, it would be Alphabet. Despite the company's gargantuan size, it still enjoys quarterly revenue growth that regularly tops 20% and a fat return on equity (RoE) of over 30%.
One more thing about that P/S: GOOGL shares have only dipped to these levels a handful of times in the Alphabet's history as a public company. And every time they did, they came roaring back.
- Industry: Credit services
- Market value: $84.4 billion
- Dividend yield: N/A
Anything even remotely related to fintech or distributed finance has had a terrible time in 2022. And some of this weakness is justified. While the financial sector is ripe for transformation, the speculation in cryptocurrencies got out of control. El Salvador essentially called the market top in Bitcoin by making it legal tender in September of last year. It peaked two months later and has been in freefall ever since.
But here's the thing. The baby was thrown out with the bathwater. Yes, cryptocurrency might not quite be ready for primetime. But the world of finance is still very much ripe for disruption. And PayPal Holdings (PYPL, $72.90) is one of the best-established players in this developing new ecosystem.
Apart from PayPal's own namesake payment system that is ubiquitous on websites, the company also owns the popular Venmo mobile app. Venmo is the preferred payment app for many young people and is popular with gig workers.
PayPal's shares are now down more than 75% from their recent highs and trade for 3.7 times sales. That's the cheapest they've been in PayPal's entire history as a public company!
If you're not interested in buying a company when it's marked down by 75%, then frankly, when are you ever going to be interested in it?
- Industry: Apparel retail
- Market value: $699.2 million
- Dividend yield: N/A
Let's step away from Big Tech for a minute.
2021 was a big year for initial public offerings (IPOs), but many of the stocks that went public last year have really struggled in 2022. As a case in point, consider the shares of eco-friendly shoemaker Allbirds (BIRD, $4.71).
Allbirds manufacturers and markets athletic and casual shoes made primarily out of wool and plant-based materials. The company even developed a "carbon-negative" foam to be used in its shoe soles, meaning that the production process actually removes carbon dioxide from the atmosphere rather than adding to it.
It's a novel company selling trendy, popular shoes that recently became available in Nordstrom stores. Yet none of that seems to matter in 2022. The shares are currently more than 80% below their 52-week highs, and roughly 70% below their $15 IPO price.
BIRD is more speculative than many of the other best stocks for 2022 covered here. It has a market cap of less than $700 million and is not yet profitable. But it's worth noting that institutional investors have a preference for companies with strong environmental credentials, and it's hard to find too many companies with stronger environmental bona fides than Allbirds.
And with a market cap as low as Albirds' current valuation, the company could also be a takeover target for a traditional apparel retail name looking to boost their image.
- Industry: Restaurants
- Market value: $1.8 billion
- Dividend yield: N/A
For another recent IPO that has really struggled in 2022, consider the shares of Dutch Bros (BROS, $33.32). Founded in 1992, Dutch Bros is an operator and franchisor of drive-through coffee shops specializing in espresso-based drinks. As of year-end 2021, the company had 538 locations spread across 12 states. And it plans to open at least 130 stores by the end of this year.
This is a tough environment for companies in the food and drinks business. Labor is expensive and hard to come by, and inflation has been unrelenting. And there is the broader risk that the combination of a slower-growing economy and rising prices will cause consumers to pull back.
That might be true, but expenditures on little luxuries such as premium coffee tend to be pretty recession-resistant, as they offer a cheap escape from life's frustrations.
BROS stock is currently sitting about 60% below its 52-week high set shortly after its late 2021 IPO. It also trades at 3.3 times sales. That's a reasonable valuation for a high-growth company looking to increase its store count by 24% this year.
- Industry: Entertainment
- Market value: $171.8 billion
- Dividend yield: N/A
Walt Disney (DIS, $94.34) has really taken a lot of abuse this year. Increased competition in the streaming video space has made its Disney+ growth story look less compelling. Inflation and labor shortages haven't helped either, nor has a nasty public spat with the state of Florida that has seen the company's special tax status under attack.
All of this has contributed to the shares losing more than half their value from their 2021 highs.
But we shouldn't underestimate Mickey Mouse. Disney is the premier name in family travel and entertainment and owns some of the most valuable media properties in history in the Marvel Cinematic Universe and Star Wars.
And after the tumble in the share price, Disney trades at prices first seen in 2014 and at a forward price-to-earnings (P/E) ratio of just 17.
We can't say for sure when the bottom will be in. But it's not every day that you can get an iconic American company trading at prices from nearly a decade ago.
- Industry: Semiconductors
- Market value: $397.0 billion
- Dividend yield: 0.1%
Here's a sobering comment for you. Intel (INTC) CEO Pat Gelsinger recently said that he expects the semiconductor shortage to last well into 2024. So, it you were hoping for a quick resolution … well, don't.
The tightness in the chip market is a major source of frustration for makers of everything from cars to home appliances, and it has been a contributing factor to the inflation inferno that's been raging out of control for all of 2022. But it also presents an opportunity for leading chipmakers to boost output and take advantage of strong pricing.
Leading graphics processing unit (GPU) maker Nvidia (NVDA, $158.80) is particularly interesting here because its chips are critical to some of the biggest trends in computing today, including artificial intelligence, autonomous driving and cloud computing. We might see a recession this year; we might not. It certainly can't be ruled out. But regardless, the trends driving Nvidia's growth remain firmly in place. In fact, investment in artificial intelligence and cloud computing might actually accelerate in a recession as a way to cut labor costs.
Nvidia is insanely profitable for a hardware company, with an RoE of 42% over the past year and net margins of 32%. Those are software numbers from a hardware stock!
NVDA shares have been more than cut in half since late 2021, and we can't know for sure when the bleeding will stop. But the business has never been stronger, and it's not unreasonable to expect Nvidia to swing back and become one of the best stocks to buy for the rest of 2022.
- Industry: Home improvement retail
- Market value: $110.2 billion
- Dividend yield: 2.4%
Houses are wildly expensive these days for a host of reasons, but at the end of the day it really comes down to supply and demand. The supply of new homes has simply not kept pace with demand due to natural population growth and to the millennials finally settling down and starting families.
At the same time, soaring mortgage rates have made already expensive homes all but unaffordable to a lot of would-be buyers. This creates challenges. But it also creates opportunities for hardware and home good stores like Lowe's (LOW, $172.47). Homeowners, and particularly millennial homeowners, have been investing in their homes. Fully 75% of millennial homeowners started a home improvement project during the pandemic.
But even in the post-pandemic world, demand for home improvements has remained strong. Many new homeowners are choosing to buy older homes as the inventory of new homes has simply not been able to keep up with demand.
Lowe's is down about 35% from its highs, and at current prices, shares trade hands for 14 times earnings and yield 2.4%.
About that dividend: Lowe's just raised it by 31% last month. There's no greater sign of confidence by management than an aggressive dividend hike. Companies have a natural tendency to hoard cash, so they're generally not willing to part with it via dividend payments unless they see a lot more coming in to replace it.
Lowe's clearly is confident on that front: LOW is a Dividend Aristocrat with nearly half a century of uninterrupted payout hikes behind it. So if you want to bet on a second-half rebound and put a dividend grower in your pocket, Lowe's is one of the best stocks to buy for the remainder of 2022.
- Industry: Home improvement retail
- Market value: $278.2 billion
- Dividend yield: 2.8%
If Lowe's is a Buy, then it only makes sense to give rival Home Depot (HD, $270.73) a good look too.
HD shares have really struggled this year and are now down by about 35% from their highs. We should look at this recent setback as a buying opportunity in one of greatest success stories in the history of American retail.
Inflation is a worry, and justifiably so. Investors worry that inflation – and the higher mortgage rates that come with it – will deter home buying and major renovation projects.
Home Depot is not impervious to these forces, of course. But it's hard to see inflation having a meaningful impact on smaller do-it-yourself projects. And the demographic trends supporting the housing market – namely the family formation of the millennials – are durable and should help to balance any weakness due to rising mortgage rates.
- Industry: Real estate (industrial)
- Market value: $81.7 billion
- Dividend yield: 2.9%
The aforementioned Amazon.com is just about unstoppable. It's all but inevitable that a greater and greater percentage of commerce will be happening online.
That means that demand for the logistical real estate that supports e-commerce is also unstoppable. And that brings me to Prologis (PLD, $110.36), a real estate investment trust (REIT) specializing in exactly those types of properties. Prologis owns and operates more than 4,600 buildings with an astounding 1 billion square feet of space. And it's all about to get even bigger considering that Prologis just agreed to acquire its largest rival in the industrial space, Duke Realty (DRE).
Prologis' shares have struggled in 2022, down about 35% from their 52-week highs. REITs tend to be interest-rate sensitive, and the Fed's aggressive rate hikes certainly haven't helped. Yet Prologis' dividend yield, at 2.9%, is the highest it has been in years, and the company's business prospects have never been brighter.
This best-in-class REIT is poised to recover, making it one of the best stocks to buy for the second half of 2022 … and beyond.
- Industry: Discount stores
- Market value: $64.6 billion
- Dividend yield: 3.1%
During the first half of 2022, retail powerhouse Target (TGT, $139.30) unwittingly became the poster child for everything plaguing the economy. The company's inventory, which was weighted heavily to home goods, electronics and other items popular during the pandemic, suddenly made a lot less sense when consumers were diverting more of their expenditures on travel, experiences and new office clothes. This forced Target to mark down a lot of its inventory and slash its orders, which didn't exactly send a signal of confidence.
And naturally, the inflation that is wrecking the economy hasn't spared Target or its consumers. Target's costs are rising at a time when its middle-income consumers are strapped for cash and can't absorb cost hikes themselves.
Amid the doom and gloom, Target's share price is down by nearly half from its 52-week highs.
But here's the thing: Target's management clearly isn't too concerned about its outlook. The company just raised its dividend by 20%. This tells me that they believe their current travails to be a mere bump in the road.
Meanwhile, the shares are cheap, trading at just 12 times earnings. Target would seem like a safe bet as a turnaround in the second half of the year.
- Industry: Integrated oil and gas
- Market value: $291.5 billion
- Dividend yield: 3.8%
Energy stocks have been one of the few bright spots in 2022. But as we wrap up the quarter, even the energy supermajors are getting beaten up. As a case in point, take a look at Chevron (CVX, $148.38). Between September of last year and May 2022, the shares nearly doubled in value. But after a rough May and June, the shares are now down about 18% from those highs.
CVX might seem like an odd pick among the best stocks to buy for the rest of 2022. The bull market in energy stocks could be over. Anything is possible. But that's not likely. Energy stocks are still cheap and underowned relative to the broader market and pay some of the highest dividends you're going to find. Chevron sports a current yield of 3.8%.
Remember, the bull market in energy shares was a long time coming. Chevron's shares only recently broke through their old 2014 highs, and energy bull markets tend to run for years. Energy was one of the best performing sectors coming out of the 2000 tech bust, and it's not unreasonable to expect history to repeat itself here.
Digital Realty Trust
- Industry: Real estate (datacenters)
- Market value: $36.2 billion
- Dividend yield: 3.8%
We covered the general invincibility of Amazon.com and its peers. Demand for e-commerce and for cloud computing will not be letting up any time soon. If anything, a rough economy might actually accelerate it as consumers and businesses alike look to cut costs.
This plays nicely into the business model of Digital Realty Trust (DLR, $127.18), a leading datacenter REIT. Digital Realty has more than 4,000 customers spread across 50 metro areas around the world, and it counts among its largest tenants International Business Machines (IBM), Oracle (ORCL), LinkedIn, Verizon (VZ), Comcast (CMCSA) and a host of other household names.
We live in the era of Big Data, and a greater and greater percentage of data storage and processing is happening in offsite datacenters. And apart from the efficiency and cost savings of this model, there is a security component as well. No major enterprise can risk the possibility that a natural disaster or act of terrorism takes out their systems. Having redundancy in place via far-flung datacenters is a no brainer.
REITs are sensitive to interest rate moves, and it's not surprising that DLR has followed the market lower. It's currently sitting about 28% below its 52-week highs. But the trends backing the REIT aren't slowing, and we can collect a growing 3.8% dividend while we wait for the market to appreciate this.
- Industry: Real estate (retail)
- Market value: $39.0 billion
- Dividend yield: 4.6%
Real estate investment trust investors tend to focus on dividend yield, and with bond yields as depressed as they've been in recent years, many investors have come to view REITs as a substitute for bonds.
That's not a problem when yields are falling. Falling bond yields mean rising bond prices … and rising prices for bond substitutes like REITs. Of course, the exact opposite happens when yields are rising as they do today. Rising bond yields mean falling bond prices … and pressure on anything that has come to be viewed as bond like!
This brings me to conservative retail REIT Realty Income (O, $64.87). Realty Income is about as close as you can get to a bond while still being a stock. The company sports a competitive 4.6% dividend yield, but unlike bond coupon payments – which never change – Realty Income raises its dividend every year.
Actually, Realty Income raises its dividend four times per year! The REIT has hiked its dividend for an impressive 99 consecutive quarters.
We don't know what new challenges the second half of 2022 will bring. But it's safe to assume that Realty Income will continue to raise its dividend like clockwork.
Energy Transfer LP
- Industry: Oil and gas midstream
- Market value: $30.3 billion
- Dividend yield: 8.1%
Energy has been a bright spot in 2022, though even most energy stocks took a beating in May and June. That's the nature of a bear market. Even profitable companies enjoying a windfall get roughed up as investors have to sell their winners to cover losses elsewhere.
Once the market settles down a bit, energy stocks should enjoy a solid finish to 2022 and may continue to lead for years to come. It seems like an eternity ago, but energy stocks were some of the strongest performers in the 2003-2007 bull market that following the 1990s tech boom and bust.
One stock in the sector to watch is pipeline giant Energy Transfer LP (ET, $9.83). Energy Transfer operates a massive network of 120,000 miles of pipelines crisscrossing North America. Approximately 30% of America's crude oil and natural gas is moved through Energy Transfer pipelines.
Energy Transfer is up strongly in 2022, bucking the overall bearish trend of the market. But the shares are down sharply over the past few weeks and are now about 18% below their 2022 highs. Consider this pullback an opportunity to buy the dip.
If you need an extra sweetener, ET also pays a monster distribution of 8.1%.