If you’re looking for stocks to buy that could make you a millionaire in 2022, you’ve come to the right place. I’ve got 10 possibilities for you. But first, let’s consider the enormity of such a grand goal.
The year ahead is not expected to be nearly as prosperous as the one we’ve put behind us. For the first time ever, all 11 sectors of the S&P 500 had double-digit returns in 2021, led by energy’s 47.6% rebound.
In 2022, Barron’s roundtable of 10 investors weighed in on expectations for the index’s performance in the year ahead. Predictions ranged from a double-digit loss to an 8% gain. That’s a far cry from 26.9% in 2021.
So, if you want to become a millionaire in 2022, you either need to already have $950,000 in your portfolio or get really, really lucky with one of your bigger speculative bets.
AMC Entertainment (NYSE:AMC) finished 2020 at $2.12. It finished 2021 at $27.20. To become a millionaire in 2021, you would have had to buy 36,765 shares of its stock to achieve your goal.
Trust me: If you told your spouse at the end of 2020 that you were dumping almost $78,000 of your hard-earned savings into the theater chain’s stock, they would have divorced you. So, please keep in mind that this is an exercise in fun, not something you should try to replicate.
To build this 10-stock portfolio, I’m going to fill it with two types of companies. There will be five I see delivering good, but not great returns in 2022. The second five will be smaller, far riskier bets. If you start with a “hypothetical” $100,000, you might get there, but you probably won’t.
With that in mind, these 10 stocks could make you a millionaire in 2022:
- Microsoft (NASDAQ:MSFT)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B)
- Nvidia (NASDAQ:NVDA)
- Nike (NYSE:NKE)
- Innoviva (NASDAQ:INVA)
- BrightSpere Investment Group (NYSE:BSIG)
- The Aaron’s Company (NYSE:AAN)
- The Buckle (NYSE:BKE)
- Thryv Holdings (NASDAQ:THRY)
Stocks to Buy: Microsoft (MSFT)
I have to admit I didn’t put Microsoft on this list because it’s buying Activision Blizzard (NASDAQ:ATVI) for $68.7 billion. CEO Satya Nadella’s going to have his hands full trying to convince regulators that the acquisition doesn’t push the envelope when it comes to tech influence.
But as Barron’s recently noted, quoting Wedbush analyst Dan Ives, it was now or never for Nadella:
“‘From a regulatory perspective, Microsoft is not under the same level of scrutiny as other tech stalwarts (Amazon, Apple, Facebook, Google) and ultimately Nadella saw a window to make a major bet on consumer while others are caught in the regulatory spotlight and could not go after an asset like this,’ Wedbush analyst Dan Ives wrote in a research note about the deal.”
Microsoft’s trailing 12-month (TTM) free cash flow (FCF) is $60.7 billion, or about 88% of the purchase price. Activision’s TTM FCF is $2.8 billion. Together, they’ll pay for the deal in almost a year.
With or without ATVI, MSFT stock is good for 20% gains in 2022.
Alphabet (GOOG, GOOGL)
Microsoft’s FCF margin is other-worldly at 34.4%. The parent of Google and YouTube isn’t too shabby at 27.4%.
Alphabet has tripled its free cash flow since 2018. That’s pretty darn good.
As if the company needs any more help, Verily, its healthcare business, announced on Jan. 20 that it would work with L’Oreal (OTCMKTS:LRLCY) to develop new skincare products using Verily’s data on skin management. According to Reuters sources, Verily generated $400 million in revenue in 2021 but isn’t profitable. Verily has denied those numbers.
When you’ve got $66 billion in FCF, you can afford to have a few mistakes on your resume. They’ll do just fine with or without the cosmetics company.
Stocks to Buy: Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway’s Class B shares gained 28.9% in 2021, 200 basis points better than the S&P 500. That’s the best annual return for Berkshire stock since 2013.
The important thing about owning its stock is that it plays defense better than most large companies. Since 2001, Berkshire has had three down years out of 20. You pay no fees for the world’s cheapest mutual fund. If the world falls to pieces in 2022, at least you can protect some of your downside.
What’s going on at the conglomerate that’s exciting?
On Jan. 20, Bloomberg reported that Berkshire’s Mid-American Co. is looking to develop the Wind Prime renewable energy project in Iowa. The venture would deliver 2,042 megawatts (MW) of wind generation and 50 MW of solar energy, enough to power 600,000 homes. If approved, the project could be completed sometime in 2024.
In case you’re wondering, 600,000 works out to be about 50% of the total number of households in Iowa.
The best offense is a good defense.
The chip maker’s stock has hit a rough patch early in 2022. If you’re a long-term investor, this is just the cooldown you’ve been hoping for from CEO Jensen Huang and the rest of the brainiacs at Nvidia.
From the company’s 52-week high of $346.47 reached in late November, NVDA stock is down 31%. Additionally, the company’s TTM FCF is $7.2 billion. It’s never been this good. What an ideal time to buy.
As Datamation contributor Rob Enderle recently wrote about Huang:
“Jensen Huang personifies a trifecta in that he has remained focused on the business, current with the technology, and he has the inherent loyalty of his people, which allows NVIDIA to outperform its peers consistently.”
In my opinion, Huang and a handful of other CEOs are the best managers in American business. As Enderle said, he’s not afraid to take chances.
43 analysts cover NVDA stock. 35 of them either rate it a “buy” or “overweight.” They give it a median target price of $350.
Stocks to Buy: Nike (NKE)
Like Nvidia, Nike has been in a bit of a cooldown in recent weeks. It’s got a total return of -12.4% year-to-date (YTD) through Jan. 26 and a one-year total return of 6%. By comparison, the entire market’s total return over the past 52 weeks was 13.8% as of Jan. 20.
If you go back over the past three fiscal years, Nike’s TTM FCF of $6.46 billion is higher than it’s ever been. Its FCF margin is 13.9%. Between fiscal 2019 and 2021, its average FCF margin was 9.8%.
Nike is rolling like it’s never rolled. Yet, its valuation compared to past multiples is reasonably cheap.
At the beginning of January, CNBC reported that Guggenheim named Nike its “best idea” for the retailing and specialty softlines industries in 2022.
There have been three big buying opportunities for NKE stock since 2010: August 2017, March 2020 and January 2022. Do not miss this opportunity. Nike’s direct-to-consumer business has never been stronger.
If I said I know a lot about Innoviva, I’d be lying. I’d never heard of it until I did a stock screen for smaller companies with strong cash flows. The holding company that generates royalty revenue from healthcare investments jumped off my screen.
Founded in 1996 as Advanced Medicine Inc., it was rebranded as Innoviva in 2016. It basically makes money from products commercialized by GlaxoSmithKline (NYSE:GSK). I recommend you read its December 2021 corporate presentation to find out more about its revenue streams.
All I know is that it expects to generate $2.2 billion in royalties over the next five years. Royalty income is awesome because the margins are so high. Innovia’s TTM FCF margin is 93.6%.
Its stock performance has been sporadic at best. But like most holding companies that allocate capital, investors don’t do the work to understand the underlying value of the assets. If you like digging for gold, Innoviva ought to be to your liking.
Stocks to Buy: BrightSpere Investment Group (BSIG)
Until March 2018, BrightSphere was known as OM Asset Management. It was a subsidiary of Old Mutual plc until October 2014 when it went public, selling 22 million shares at $14 each. Until 202o, BSIG stock didn’t do much. In fact, in March 202o, its share price was below $5.
The holding company at one point consisted of five affiliated investment management firms. In the third quarter ended Sep. 30, 2021, it sold three of its affiliates. Acadian Asset Management is now its sole operating business. It provides quantitative solutions to institutional investors worldwide.
As a pure-play, investors should make a faster decision about buying its stock. That, in turn, should help move its shares higher.
How good are the Acadian investment strategies? Approximately 88% have outperformed their benchmarks over the past 10 years.
BrightSphere looked to repurchase more than $1 billion of its stock in the fourth quarter. That would significantly reduce its outstanding shares. With no debt and a focused strategy for growth, 2022 should be a winning year in the markets.
The Aaron’s Company (AAN)
Back in May 2020, I included Aaron’s Inc. in a list of good stocks to buy because its share price had lost more than 10% in the previous month’s trading. I argued it was a great business to own in good times and bad.
Later in 2020, the company separated its two businesses into two publicly traded companies. Its financial technology business became PROG Holdings (NYSE:PROG), and its omnichannel retail lease-to-own furniture and consumer electronics business became The Aaron’s Company.
Each Aaron’s Inc. shareholder got one share of AAN for two shares held in Aaron’s Inc., which became PROG. Today, those three shares are worth about $97, 77% higher over 14 months.
For the full year in 2021, Aaron’s expects revenues of $1.82 billion, same-store sales growth of 7.5%, and adjusted EBITDA of $225 million. As I said back in May 2020, while it’s not flashy, this lease-to-own company remains an excellent long-term investment.
Stocks to Buy: The Buckle (BKE)
The Buckle’s back, baby.
The Nebraska-based retailer used to be a favorite stock of mine because it routinely paid special dividends to its shareholders. Here’s what I said about the company in November 2012:
“From the beginning of 2008 to the end of 2012, Buckle will have paid out $3.98 in regular dividends and $13.05 in special dividends — $17.03 in total. During the past decade, BKE has increased its operating income in all 10 years; 2012 should be no different.”
I continue to believe that used properly, the special dividend can be an excellent way to return capital to shareholders.
Of course, like clockwork, Buckle’s business went into a nosedive for several years. In 2012, it had $1.12 billion in sales and $258.2 million in operating income. In 2020, it had sales of $901.3 million and an operating income of $168 million.
In December, Buckle paid a special dividend of $5.65 with a yield of 13.3%. That’s based on its Dec. 29 share price when the special dividend was paid. It also pays a quarterly dividend of 35 cents.
Buckle’s same-store sales in December increased 17.7%. All in all, it’s a worthwhile add to your list of stocks to buy.
Thryv Holdings (THRY)
At first, Thryv appears to be a case of putting lipstick on a pig. I say this because the company is the result of two Yellow Pages publishers merging in 2017. It was renamed Thryv in July 2019 to reflect its small-business software used by more than 45,000 businesses.
In the latest quarter ended Sep. 30, 2021, the company generated $297.3 million in revenue, 23.7% higher than a year earlier. Its adjusted EBITDA grew 47.7% to $102.4 million.
The exciting part of the business is its software-as-a-service (SaaS). In the third quarter, its average revenue per user (ARPU) was $340, 30.8% higher than a year earlier.
However, it’s a Catch-22. While this segment is growing at a minimum of 40% per quarter, it’s losing money on an EBITDA basis. Its legacy marketing business, on the other hand, isn’t growing but has 45% EBITDA margins.
Thryv’s goal is to grow the number of small and medium-sized businesses using its software. While the number of clients only grew by 2% in Q3 2021, the monthly active users (MAUs) grew by 15.2%. As long as the ARPU and MAU numbers keep growing, all is right with the world with THRY.