As we head into 2022, investors are looking forward to a year of opportunity and trying to read the tea leaves. There are plenty of variables in play, including inflation and interest rates. The omicron variant is ensuring the pandemic remains a force to be reckoned with. Semiconductor shortages continue to roil the supply chain. EVs are going mainstream, while gas prices are surging. Midterm elections in the U.S. are bound to be a factor. How do you pick growth stocks with so many balls in the air?
That’s why I’m here. I’ve put together a list of seven companies that are perfectly positioned for the current conditions — and for what we can see coming on the horizon. If you are searching for great growth stocks to add to your portfolio in January, consider these picks:
Avis (NASDAQ:CAR)Choice Hotels International (NYSE:CHH)Crocs (NASDAQ:CROX)Nucor (NYSE:NUE)Pfizer (NYSE:PFE)Sun Communities (NYSE:SUI)Targa Resources Group (NYSE:TRGP)
Here’s another key reason why these growth stocks are on this list. Each earns straight “A” ratings in Portfolio Grader. There are no guarantees when it comes to investing, but that’s about as close as it gets to ensuring a stock will perform well in your portfolio.
Great Growth Stocks: Avis (CAR)
One of the sectors that has had a particularly bad rap over the past 2 years is the car rental business. A big part of that was the pandemic, which decimated travel in 2020 and gutted the car rental business in the process. However, the negative perception around the industry was also a result of the very public implosion of a car rental giant that went through a messy bankruptcy and became a poster child meme stock.
To be clear, that company was not Avis, although this car rental company definitely felt the impact of the pandemic. In its second quarter 2020 earnings, Avis reported revenue down 67% year-over-year. The company took measures like cancelling 185,000 new vehicle orders and cutting executive compensation. Avis came out of 2020 lockdowns in a relatively strong position and has been taking full advantage of the gradual re-opening of the country.
In its latest quarter, Avis reported record-setting revenue of $3 billion, up 96% YoY. Notably, that revenue was also 9% greater than Q3 2019. The market reacted to these numbers with an eye-popping single-day gain of 108% for CAR stock. CAR gave much of that gain back after the initial excitement was over, but it has been a growth stock throughout 2021, delivering a 512% return so far this year. Omicron may complicate travel again in the short term, but look for Avis and CAR stock to continue to have growth momentum in 2022.
The current rating in Portfolio Grader for CAR stock is “A.”
Choice Hotels (CHH)
Choice Hotels operates a number of well-known hotel chain franchises including Cambria Hotels, Quality Inn and Econo Lodge. While the company covers a lot of ground, it has placed an emphasis on leisure travel, which has helped it recover from the pandemic despite continued weakness in business travel.
In its Q3 earnings, Choice Hotels’ CEO credited this strategy for a solid Q3 that saw the company deliver adjusted earnings-per-share of $1.51, beating Wall Street estimates: “Our impressive third quarter results are a testament to the success of our long-term growth strategy and the investments we have made to position us to further increase our share of travel demand and benefit from trends that favor leisure travel, limited-service hotels and longer stay occasions.”
One of the most assuring stats for investors was Choice Hotels’ domestic RevPAR (revenue per available room) growing again to beat Q3 2019 pre-pandemic levels by 11.4%. An industry study published in November projects U.S. domestic travel will increase by 28.4% in 2022. That study obviously doesn’t factor in omicron, but the variant’s impact is expected to wane by the spring as people get outdoors again. That means more guests at Choice Hotels locations.
CHH stock is up 44% to this point in 2021, and I expect it to continue to be a growth stock as the travel recovery continues.
At the time of publication, the Portfolio Grader rating for CHH stock was “A.”
Great Growth Stocks: Crocs (CROX)
Crocs — the foam ugly duckling of the footwear industry — became the “it” shoes during the pandemic. People valued comfort over appearance as they worked from home, and Crocs flew off shelves. They even became an investment, with Crocs made in collaboration with Justin Bieber selling out, and then showing up for hundreds of dollars on the resale market.
A funny thing happened in 2021, though. Even though many people returned to the office, Crocs kept selling at a torrid pace. In its third quarter the company posted revenue growth of 73% YoY. The company advised that despite supply chain disruptions, it expects 2022 revenue to grow by 20% over 2021’s impressive performance.
An exemplary growth stock, CROX stock is up 127% so far in 2021 and it’s closing in on a 2,000% return over the past 5 years.
CROX stock currently earns an “A” rating in Portfolio Grader.
Charlotte-based Nucor is America’s largest steel producer. It’s also the country’s largest steel recycler. Strong demand for steel as the economy ramped back up in 2021 has paid off for the company and its investors. In its third quarter, Nucor reported net earnings of $2.13 billion. That’s up 41% YoY, and a new record for the company. With that kind of performance, it’s no surprise that NUE is a growth stock, up 116% so far this year.
Next year is expected to be even bigger. President Biden’s Build Back Better plan is having a rough ride, but is expected to eventually pass. When that happens, there will be a surge in infrastructure spending — and that means even higher demand for steel. That’s going to be a catalyst for NUE stock to deliver continued growth.
Plug NUE stock into Portfolio Grader and you’ll see it earns a stellar “A” rating.
Great Growth Stocks: Pfizer (PFE)
The story of PFE stock since 2020 has been inextricably wrapped up with Covid-19. Pfizer was the first to gain Food and Drug Administration approval for a Covid-19 vaccine in 2020. With its German partner, the pharmaceutical giant has produced an estimated 3 billion doses of the vaccine in 2021. Not coincidentally, 2021 has also seen PFE stock deliver impressive growth, with a gain of 62% so far.
2022 (and likely beyond) will also see PFE stock driven by demand for its Covid-19 vaccine. Omicron is requiring the fully vaccinated to get a third, booster shot for protection. It seems likely that variants will continue to be an issue, and booster shots may become an annual tradition. Pfizer is also one of the few companies in the running for FDA approval of a pill to treat Covid-19. This is seen as a game-changer that could greatly reduce hospitalizations and deaths among those infected with the virus. And another catalyst for PFE stock growth.
At the time of publication, PFE stock was rated as an “A” in Portfolio Grader.
Sun Communities (SUI)
Sun Communities could not have been in a better position to benefit from two of the big (and long-lasting) pandemic trends: domestic travel and the desire for home ownership. Americans wanted to go on vacation but with so many uncertainties with international destinations, many chose to take summer vacations in the country and drove instead. RV sales hit record levels. At the same time, the desire for space to work from home has helped to fuel a red-hot real estate market. However, not everyone wanting to move out of an apartment can afford sky-high home prices.
Sun Communities has been buying up RV and manufactured home parks across the U.S. and Canada since 1975. The company offers an affordable manufactured home purchase or rental for people shut out of the traditional real estate market. Its RV resorts and marinas offer vacation spots for RV, trailer and boat owners.
The pandemic and the year after have proved to be lucrative for Sun Communities. In its third quarter, the company reported revenue up 70.9% YoY. That includes the sale of 1,162 homes in its communities. Occupancy has been at over 97%. Sun Communities is pushing forward to keep the growth growing. In Q3 alone, the company spent $500.2 million to purchase nine manufactured home communities, seven RV resorts and six marinas. SUI stock is up 41% so far in 2021, and the company is making all the right moves to keep up that momentum.
SUI stock currently earns an “A” rating in Portfolio Grader.
Great Growth Stocks: Targa Resources (TRGP)
One of the big stories of 2020 was the collapse of natural gas prices. In 2021, the story has been the opposite: Natural gas prices have been going through the roof. The market for LNG (liquid natural gas) has also improved dramatically, with Europe and Asia facing low inventory and increased demand.
Houston-based Targa Resources operates a large natural gas and LNG infrastructure network. This includes pipelines, transportation, processing, storage facilities and LNG export facilities.
Not a great business to be in back in March 2020, but in 2021 TRGP stock has been in growth mode. Investors have seen their shares increase in value by 94% so far in 2021. With the pressure on to phase out coal use globally, demand for natural gas is likely to keep that TRGP growth story going.