Top 5 US stocks: can big tech continue to outperform in 2022?
With interest rate hikes widely anticipated in the market to curb inflation in 2022, many investors are revising their strategy to find the best returns for their portfolios.
On 15 December, the US Federal Reserve (Fed) said that it would “reduce the monthly pace of its net asset purchases by $20bn for Treasury securities and $10bn for agency mortgage-backed securities.” The Fed has indicated that tapering will precede increase in interest rates.
The Fed is also aiming to keep the inflation rate at 2% over the longer term, which is below the current rate of 6.8% recorded for November, the highest since 1982.
With inflation likely to remain next year, investment fund Black Rock expects stocks to offer the best investment returns. Tony DeSpirito, chief investment officer, US Fundamental Equities at Black Rock wrote on 15 December:
With the US stock market expected to grow next year, let’s look at the top five US stocks by market capitalisation, and find out analysts’ view on the best performing US stocks. Read on to learn what shares to buy in the US and which US companies to invest in.
According to financial data provider Companiesmarketcap.com, the five largest American companies by market capitalisation are Apple, Microsoft, Alphabet (Google), Amazon and Tesla.
The above top five US stocks are established household brand names and their shares are already trading at a premium to most companies. However, some analysts believe they are still the top American stocks to watch as they may still be an attractive investment.
Apple
Mobile phone, computer and consumer electronics maker Apple’s share prices rose sharply over the past month. Apple shares traded on NASDAQ exchange hit an all-time high at $182.13 per share on 13 December. Although the stock price has since moved downwards and closed at $171.14 on 17 December, it remained 32% above the value at the beginning of the year.
Despite the recent Apple share price surge, The Motley Fool’s contributing writer Daniel Sparks said the stock valuation is relatively conservative compared to the company’s sales and earning momentum.
Apple is also one of the most active US stocks, with 13.7 million share volumes traded on NASDAQ exchange as of 20 December.
Microsoft
The share price of NASDAQ-listed software and cloud infrastructure provider Microsoft has been rising for most of 2021 and hit a record-high at $349.67 per share on 22 November.
Although Microsoft has since fallen and closed at $323.80 on 17 December, the tech stock is still 49% higher than the value at the beginning of the year.
“Despite a record-high stock price and a massive market cap, investors should consider Microsoft. Admittedly, Amazon continues to lead the cloud market. Nonetheless, Microsoft has emerged as its most formidable cloud competitor,” wrote Will Healy on The Motley Fool.
Microsoft also has a solid balance sheet with more cash than debt, leaving the company with more room to increase its dividend pay-out for shareholders.
According to The Motley Fool, Microsoft could become one of the best US dividend stocks “given its 10-year streak of dividend increases.”
According to The Motley Fool, if you are looking for US stocks to buy and to invest for the long term, dividend stocks with excellent business models and stable income streams, and preferably strong dividend track records, will be suitable for your portfolio.
Alphabet
Shares of Alphabet, the parent company of Google, surged on the NASDAQ to a record high this year at $3,019,33 on 18 November. Although its share prices have since dropped below $2,900 and was last at $2,834.50, the stock value is 64% higher than at the beginning of the year.
Google’s third-quarter financial results exceeded expectations with advertising and cloud computing revenue rising more than 40% year-on-year (yoy).
Google’s advertising revenue increased by 43% yoy to $53.13bn in July to September 2021, while earnings from cloud computing sales also rose by 45% to $4.99bn.
However, with regulatory oversight set to increase in the US after President Joe Biden signed an executive order promoting competition in the country, this could potentially limit growth through mergers and acquisition by big technology companies such as Google.
In addition, analysts warned that the easing of social distancing restrictions could impact Google’s online advertising revenue next year.
“GOOGL stock will also face more difficult year-over-year growth comparisons in 2022 as the coronavirus emergency fades,” wrote Investors.com.
Amazon
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Amazon is an US technology company focused on E-commerce, cloud infrastructure and digital streaming. Of the top technology companies, Amazon shares traded on NASDAQ exchange have had a relatively sub-par performance this year compared to the double-digit growth of its competitors.
The company’s stock price started the year at $3,186.63 and rose to an all-time high at $3,773.08 on 13 July but fell in the second half of the year. The stock was last at $3,344.90 on 20 December, up 5% compared from the beginning of the year.
The outage on the company’s cloud infrastructure Amazon Web Service on 7 December has hit investors’ confidence and limited gains in its share prices this year. However, Amazon shareholder Eric Cuka believes Amazon stock could rebound in 2022 because of below five reasons:
In Cuka’s US stock forecast analysis, he argues that Amazon’s share price doubled over the pandemic time in 2019-2020 and he believes that Amazon stock will outperform the S&P 500 in a year’s time.
Tesla
Electric vehicle (EV) maker Tesla’s strong performance this year has made market headlines as higher vehicle sales lifted its stock prices and boosted the company’s market capitalisation above $1trn in late October.
Tesla share prices have surged this year, starting at $729.77 a share at the beginning of the year, and peaking at $1,243,49 on 4 November. Although prices fell in December and were last at $908.02 on 20 December, the EV maker’s stock value was 24% higher than at the beginning of the year.
Although the lower Tesla share prices may present a buy opportunity for investors, investors.com said in its technical analysis that the EV stock is “currently not a buy.”
Best US growth stocks
Outside the top five companies by market capitalisation, there are other smaller cap companies which are expected to grow rapidly next year.
Washington-based business forecaster and financial advisor Kiplinger published a list of 22 stocks to buy for 2022 in early December, which included “more defensice and durable names” across a wide range of industries, “just in case omicron or another variant slows the comeback.”
The top companies set for strong growth in 2022 are Walt Disney (DIS), Uber (UBER), LHC Group (LHCG), IAC/InterActiveCorp, DXC Technology and others.
When considering whether to invest in the company’s stock, you should always do your own research, considering the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which it trades and your risk tolerance. And never invest money that you cannot afford to lose.
FAQs
Are US stocks a good buy?
Performances of US stocks can be cyclical and affected by macroeconomic conditions and global economic growth.
Whether US stocks are a good investment for you or not depends on your investing goals and portfolio composition. You should do your own research and never invest what you cannot afford to lose.
Which US stocks to buy long term?
Some investment sites such as The Motley Fool suggest buying stocks with a track record of dividend payouts for long-term investment, but this is only an indication and does not guarantee returns in the future.
Only you can decide which US stock suits your portfolio and investing goals.
Why are US stocks going up?
The US stock market performance is driven by many factors, including macroeconomic conditions, such as interest rates, inflation, geo-political tension and consumer demand. Every listed company stock would react differently to the above factors.
Read more: JP Morgan stock forecast: Can the stock recover cyclical downturn?
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