3 Value Stocks That Could Outperform in 2022

Given the favourable business environment and healthy growth prospects, these three value stocks could outperform in 2022.

| More on:

Image source: Getty Images

Amid the rising inflations, the Federal Reserve of the United States has taken several initiatives. The central bank has announced plans to accelerate the reduction in its monthly bond purchases and raise interest rate three times in 2022, two times in 2023, and two more times in 2024. With these measures, borrowing costs could rise, thus widening net losses of high-growth stocks, which are burning cash to fund their growth initiatives.

So, I expect value stocks to outperform growth stocks next year. If you want to invest in value stocks, my three top picks are here.

Suncor Energy

The rising hope that Omicron would not be as intense as earlier estimated and lower inventories have led oil prices to bounce back strongly and trade over US$70 per barrel. Meanwhile, analysts are projecting oil prices to rise further and hit US$100 per barrel next year. Higher oil prices could benefit oil-producing companies, including Suncor Energy (TSX:SU)(NYSE:SU).

The company, which has witnessed strong buying this year, could also continue its upward momentum in 2022. The company’s management has planned to increase its production by 5% next year while raising its downstream business to pre-pandemic levels amid rising consumer demand. Its debt-reduction initiatives and share-repurchase program could also drive its financial growth in the coming quarters.

Meanwhile, Suncor Energy also trades at an attractive forward price-to-earnings multiple of 7.2. So, given the favourable business environment, growth initiatives, and cheaper valuation, I expect Suncor Energy to deliver superior returns next year. The company also pays a quarterly dividend with its forward yield standing at a juicy 5.36%.

goeasy

Amid the recent pullback due to the weakness in the broader equity market, goeasy (TSX:GSY) has lost over 18% of its stock value from its September highs. The selloff has also dragged its valuation down to attractive levels, with its forward price-to-earnings multiple standing at 15.6. The improvement in economic activities has increased loan originations, expanding the company’s loan portfolio to $2 billion.

Amid the rising demand for its services, goeasy is strengthening its digital channels, venturing into new markets, increasing its penetration, and adding new business segments to enhance its market share. The company’s management hopes to increase its loan portfolio to $3 billion by the end of 2023. So, these initiatives could boost the company’s financials and drive its stock price in the coming years. Meanwhile, the company has also raised its dividends for the last seven years at a CAGR of 34%. So, goeasy would be an excellent buy right now.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) has underperformed the broader equity markets this year, with the company losing close to 10% of its stock value. The correction has dragged its forward price-to-earnings multiple down to 18.6, providing an excellent buying opportunity. The company operates low-risk utility and regulated renewable power-generating assets, generating stable cash flows. 

Additionally, Algonquin Power & Utilities has announced a new US$12.4 billion capital plan, which the company expects to invest in over the next five years. Of these investments, 70% will be on the utility assets and 30% on the renewable business. It is also working on closing Kentucky Power Company and Kentucky Transmission Company acquisitions. These investments and acquisitions could grow its rate base at a CAGR of 14.6% and boost its financials in the coming years. Meanwhile, the company also pays a quarterly dividend, with its forward yield at 4.77%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Investing

bulb idea thinking
Stocks for Beginners

3 No-Brainer Stocks to Buy Now for Less Than $1,000

If you're looking for companies bound for more greatness, these three no-brainer stocks are easy buys, no matter what the…

Read more »

Target. Stand out from the crowd
Investing

Finning International: A Reasonable Buy Here

Finning International is a cyclical dividend stock that offers decent long-term returns potential of north of 10%.

Read more »

Dollar symbol and Canadian flag on keyboard
Stocks for Beginners

TFSA: 4 Canadian Stocks to Buy and Hold Forever

Here are four stocks that you can buy and hold for decades in your TFSA.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, April 23

Important economic data from the United States could keep TSX stocks volatile this morning as falling metal prices pressure the…

Read more »

Dividend Stocks

Buy 3,000 Shares of This Super Dividend Stock For $3,300/Year in Passive Income

Are you looking for a super dividend stock to buy now and generate a whopping passive-income stream? Here's an option…

Read more »

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

BIP (TSX:BIP) stock fell dramatically after year-end earnings, but there could be momentum in the future with more acquisitions on…

Read more »

Utility, wind power
Dividend Stocks

So You Own Algonquin Stock: Is It Still a Good Investment?

Should you buy Algonquin for its big dividend? Looking forward, the utility is making a lot of changes.

Read more »

Big Bitcoin logo.
Investing

2 Cheap Stocks to Add to Your TFSA Before They Get Expensive

If you want to buy the dip and sell the rally, these two TSX stocks are a bargain you don’t…

Read more »