The year 2021 was a crazy one for the stock market. The last year witnessed Dogecoin go to the moon, the rise of the Redditors with meme stocks, and then oil prices skyrocketing to over US$75/barrel. Amid this mania emerged three winners: crypto stocks, energy stocks, and meme stocks. In this article, I will discuss whether these stocks have more growth left or if it’s time to sell.
Crypto stocks in 2022
Crypto fever gained momentum once again in November 2020 after the 2017-18 bubble. And now the crypto fever is gradually easing again, with most crypto stocks down more than 50%. This decline comes after a regulatory crackdown in China and India. But the 2020-21 bubble created a stir. Companies and governments are reconsidering the role of crypto and how to regulate it.
The Toronto Stock Exchange even launched Bitcoin ETFs. Moreover, crypto mining stocks like Hive Blockchain Technologies and Hut 8 Mining started trading on NASDAQ. It has become easier for investors to get crypto exposure. I believe all these developments could bring another growth wave earlier than three years.
Crypto stocks could continue to fall in the first half of 2022, as the tech sector remains bearish and rising energy prices make crypto mining less attractive.
Energy stocks in 2022
Energy was a clear winner in 2021, with oil prices rising to 2016 highs. The pandemic created a huge gap in demand and supply, and the re-opening of the economy created a sudden pent-up demand. Oil inventories are not designed for such sudden, big moves. While the lockdown created a sudden dip in demand, recovery in demand was slow. But it was the conservatism of oil producers that encouraged them to avoid increasing supply. You can’t blame the producers, as the pandemic waves created a lot of uncertainty.
The year 2022 could be another year of up and down cycles, as producers gradually increase oil supply while the demand wavers. Suncor Energy (TSX:SU)(NYSE:SU) and Enbridge stocks have surged 17.5% and 12%, respectively, since December 20. Suncor made a new 52-week high, making it a stock worth holding. But do not buy the stock at its peak. Wait for a downturn, which I expect somewhere in February end. A price of $30-$31 is a good entry point for this oil stock, as there is no long-term uptrend in the cards.
Meme stocks in 2022
If you think crypto was crazy, then what will you call meme stocks? A group of Redditors — WallStreetBets — stirred hedge funds by making use of a single strategy short sale. They targeted stocks in a long-term downtrend — like GameStop, AMC, and BlackBerry — and inflated their stock prices by 400-500%.
Are you wondering if there is any scope for meme stocks? These are nothing but social media hype that will die down. Another wave of hype might come sometime in the future, but probably not in 2022. This is the year of conservatism, as rising inflation and fading stimulus checks leave little liquidity in the hands of consumers. So, I don’t expect investors to pull a meme stock stunt.
Short-seller market
With the meme stock craze in 2021, you may have learned about shorting a stock, and you may have read about Spruce Point Capital. This short-seller has been making headlines, as it cracks down on tech stocks that started trading on the stock exchange a few years back. Starting with Lightspeed and then Nuvei, Spruce Point dug into their shifting numbers and performance metrics and put them in a bad light. Had there been something materially wrong with these companies, they would have fallen into regulatory scrutiny. Until a regulator asks the two companies questions about their financial statements, you can stay optimistic that these stocks might rebound.
The two companies have grown by delivering services. The revenue they are earning is from a tangible and legit business. And the founders continue to run the company. Spruce Point highlights the tainted past of a few executives, which makes me cautious, as fraud or a scam could leave the company’s stock in deep red for the long term.
A safer option would be to remain cautiously optimistic and not hesitate to sell the stocks for a loss.
