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

Caution, careful
Stocks for Beginners

Don’t Get Taxed by Surprise: The TFSA’s Dirty Little Secret

Did you know that you can be taxed in a Tax-Free Savings Account (TFSA)? It’s not common knowledge, but it’s …

Read more »

Question marks in a pile
Stocks for Beginners

New Investors: Do You Need Bonds in Your Investment Portfolio?

The traditional investment portfolio would have a bond and equity component. Do you really need bonds in your investment portfolio? …

Read more »

Top view of people having party, gathering, celebrating together
Investing

Plant-Based Foods Growth: Why I’m Buying This TSX Stock on the Dip

SunOpta (TSX:SOY) is a Minneapolis-based company that manufactures and sells plant-based and fruit-based food and beverage products to a variety …

Read more »

Coronavirus written newspaper close up shot to the text.
Tech Stocks

The 2 Best Tech Stocks to Buy Today for Low-Risk Investors

Overvalued tech stocks are undergoing a major correction after inflating on the back of high liquidity from fiscal stimulus packages. …

Read more »

crypto blockchain
Cryptocurrency

How Cheap Can Crypto Mining Stocks Get Before They Are Worth a Buy?

Over the last two years, during the significant rallies in the crypto industry, some of the biggest gainers and best …

Read more »

Aircraft wing plane
Coronavirus

Air Canada (TSX:AC): Is $22/Share Cheap or Expensive?

The TSX Composite Index corrected 2.3% since December 30, 2021, as tech stocks saw a huge selloff over the anticipation …

Read more »

exchange traded funds
Energy Stocks

3 Sector-Specific ETFs to Consider

Exposure to a specific sector doesn’t make sense from a diversification perspective, but it is often a good way to …

Read more »

silver metal
Metals and Mining Stocks

1 Reeling Silver Stock to Consider Today

Aya Gold & Silver (TSX:AYA) is a Montreal-based company that is engaged in the acquisition, exploration, evaluation, and development of …

Read more »