The Top 11 Stocks for 2022

The U.S. is grappling with serious problem: runaway inflation.

The fact of the matter is the U.S. is now teetering on the edge of a recession as stagflation zaps consumer buying pressure and economy growth stalls. As a result, Americans are now facing empty store shelves and surging gasoline prices.

With inflation spinning out of control, the Federal Reserve has to raise key interest rates because market rates are rising. The fact of the matter is the Fed cannot fight market rates.

Scared? Everyone is.

However, if you’re invested in the right stocks, then you shouldn’t be. Historically, growth stocks and dividend stocks are your best defense against rising inflation. The reality is stocks are great inflation hedges because they represent ownership in real businesses. And great businesses act as inflation “pass through” vehicles. An inflation “pass through” vehicle is a business that “passes along” the price increases that occur as a result of inflation.

The nominal price of inputs and product prices might change, but the businesses’ profit margins do not. They simply “pass through” the inflation, which allows their profits and market values to rise along with prices.

Of course, you don’t want to invest in just any stock. You want the best of the best. The companies whose growth won’t be curtailed by inflation and will continue to boast strong earnings and sales growth.

In this report, I’m going to show you 11 companies that have emerged as the crème de la crème that you should buy in 2022. With strong sales growth and profits ahead, these stocks are a must-have for your portfolio as we navigate our way through this inflationary environment.

Top Stock #1: IDXX

In the past 30 years, IDEXX Laboratories, Inc. (IDXX) has grown into a leading provider of veterinary products and services. Last year alone, the company dedicated $100 million in research and development; as a result of this dedication to innovation and new products, IDEXX Labs has a variety of products that are used by veterinarians in more than 175 countries.

A few of the products developed in the past year alone include the IDEXX SDMA test, which helps veterinarians diagnose and treat kidney disease; fecal antigen testing, which helps detect intestinal infections; H3N2 Canine Influenza RealPCR Test, which provides specific testing for the H3N2 virus; and IDEXX Web PACS, a picture archiving and communications system used to optimize diagnostic imaging.

IDEXX Labs also offers equine health products, livestock and poultry diagnostics, dairy testing and water testing solutions. In fact, the company’s products offer reliable diagnosis and treatments for more than 50 diseases that are prevalent in cows, pigs, chickens and horses. And its diagnostic tests evaluate the quality and safety of water and milk.

Given the company’s already vast portfolio and commitment to R&D, it’s no wonder that IDEXX Labs continues to post double-digit earnings and sales growth.

Third-quarter revenue rose 12% year-over-year to $810 million, topping estimates for $798.16 million. Third-quarter earnings increased 20% year-over-year to $2.03 per share, which beat estimates for $1.91 per share by 6.3%.

Looking forward, IDEXX Laboratories expects full-year revenue between $3.185 billion and $3.2 billion, or 17.5% to 18% annual revenue growth. Full-year earnings per share are forecast to be between $8.30 and $8.38, which is in line with analysts’ current estimates.

Top Stock #2: GNRC

Generac Holdings, Inc. (GNRC) was the first company to develop generators for home use back in 1959 in Wales, Wisconsin. Founder Robert Kern started the company with only five employees and his own personal generator designs. Thanks to a strategic, decades-long partnership with Sears, the company’s generators were marketed under the Craftsman brand well into the 1990s.

Today, Generac is the number-one manufacturer of home backup generators, which are now marketed under the Guardian brand. In addition to its home backup generators, the company also offers portable generators, pressure washers, water pumps, transfer switches and other parts and accessories.

Generac has also developed its own clean energy power storage system, PWRcell. The PWRcell stores energy from solar panels or the electric grid, ensuring that your home is never without power in rolling blackouts or other power outage situations. The system can provide up to 11 kilowatts of backup power.

More and more Californians are rushing to install either Generac’s or Tesla’s backup power systems. But, given Generac’s vast dealer network, I look for Generac to beat Tesla.

Thanks to “exceptional demand” for its power solutions, Generac Holdings, Inc. (GNRC) achieved record results for its third quarter in fiscal year 2021. The company noted that the record revenue and growing backlog are also setting the stage for “significant revenue growth” next year.

For the third quarter, Generac reported total sales of $943 million, or a 345 increase over the $701 million in the same quarter a year ago. Residential product sales accounted for $609 million. Third-quarter adjusted earnings rose 13.55 year-over-year to $151 million, or $2.35 per share, compared to $133 million, or $2.08 per share, in the third quarter of 2020.  The consensus estimate called for adjusted earnings of $2.32 pers hare on $961.11 million in revenue.

Company management stated, “We again hit record production levels in spite of the challenging supply chain environment that deteriorated during the third quarter. We have tremendous momentum in our business as we head into 2022 with the continuation of robust home standby demand, an expanding Energy Technology solutions portfolio and strong global demand for our C&I products.”

As a result, Generac now expects full-year sales to grow between 47% and 50%, which is in line with analysts’ current projections.

Top Stock #3: EPAM

Grade school friends Arkadiy Dobkin and Leo Lozner partnered back in 1993 to introduce a software engineering services company, EPAM Systems, Inc. (EPAM). Interestingly, the company had humble beginnings and a global reach, as the company’s headquarters were in Dobkin’s apartment in New Jersey and in Lozner’s home in Minsk, Belarus.

Today, EPAM Systems operates in more than 35 countries, with more than 43,450 EPAMers and more than 275 Forbes Global 2000 customers. The company also has strategic partnerships with big-name corporations like Adobe, AWS, Google, Microsoft, Salesforce and SAP.

So, what services does EPAM Systems offer to attract such noteworthy partners? Simply put, EPAM Systems helps businesses adapt, grow more agile and faster, and stay competitive amidst a constantly evolving digital world. The company offers consultants and data expertise, designers to customize and develop digital experiences, engineers to construct software platforms, next-generation software solutions and process optimization solutions.

EPAM Systems collaborates with clients in a variety of industries, including automotive, retail, business information services, financial services, life sciences, travel and hospitality, software and insurance. The company has also partnered with healthcare clients, which includes Curogram. EPAM Systems is working with Curogram to help healthcare systems implement a simplified COVID-19 crisis response solution.

For the third quarter, EPAM achieved earnings of $2.42 per share and revenue of $988.5 million, or 46.7% year-over-year earnings growth and 51.6% year-over-year revenue growth. The consensus estimate called for earnings of $2.22 per share on $964.61 million in revenue, so EPAM topped earnings estimates by 9% and revenue forecasts by 2.5%.

For fiscal year 2021, EPAM now expects revenue to increase 40% year-over-year and for earnings per share to come in between $8.72 and $8.79, up from $6.34 per share in 2020. And for the fourth quarter, EPAM anticipates revenue between $1.075 billion and $1.085 billion and earnings per share between $2.44 and $2.51, which is nicely higher than current estimates for earnings of $2.34 per share and revenue of $1.04 billion.

Top Stock #4: NET

With operations around the globe, Cloudflare, Inc. (NET) is one of the largest networks in the world, with about 25 million internet properties housed on its network. Simply put, Cloudflare’s online platform acts as a go-between folks’ internet requests and the servers housing these internet properties to ensure that folks are able to access websites and apps quickly and securely.

Interestingly, Cloudflare was initially founded in 2004 to uncover where email spam originated. Founders Matthew Prince and Lee Holloway developed a system that enabled IT teams to track spammers on their websites. Over the next few years, the system expanded to track even more malicious threats. Soon, they were looking for ways to protect against cyberattacks.

With cybersecurity solutions, though, came concerns about latency—which the Cloudflare team decided to face head on. Its efforts paid off. Not only did Cloudflare’s system provide protection against cyberattacks, but the detection and blockage of these attacks created faster loading speeds for websites. In fact, they were loading about 30% faster.

Today, Cloudflare has data centers in more than 200 cities around the globe to process all of these requests (an average 20 million HTTP requests per second!) and to offer security solutions to protect internet properties from malicious attacks. The company’s platform also helps companies minimize costs given that they don’t need to manage or integrate individual network hardware. So, it’s no surprise that the company has more than 3.2 million customers, including about 16% of the Fortune 1000.

For the third quarter, Cloudflare reported earnings of $1.4 million, or $0.00 per share, up from an earnings loss of $5.8 million, or a per share loss of $0.02. The consensus estimate called for an earnings per share loss of $0.04, so NET posted a whopping 400% earnings surprise. Third-quarter revenue rose 51% year-over-year to $172.3 million, also topping estimates for $165.65 million.

The company also added approximately 170 large customers during the third quarter, which brought its total large-customer count to 1,260 and added nicely to its top and bottom lines.

Company management commented, “We had a landmark third quarter, with revenue growth up 51% year-over-year and large customer growth up 71% year-over-year. Our strong growth and efficiency also propelled us to reach profitability this quarter, achieving that milestone a year ahead of our original timeline.”

Looking forward to the fourth quarter, Cloudflare expects total revenue between $184 million and $185 million. Earnings per share are expected to range from a loss of $0.01 to $0.00. That compares to revenue of $125.93 million and earnings per share loss of $0.02 in the fourth quarter of 2020.

Top Stock #5: CLFD

One corner of the market that has continued to expand, despite the global pandemic, is 5G.

As you probably know, 5G is the next generation of internet infrastructure and connectivity. With 5G, download speeds could be between 10 and 100 times faster than what’s currently available. All of the big wireless carriers, including Verizon, AT&T, Sprint and T-Mobile, are vying for the fastest network, and all released some form of 5G last year.

However, I’m not interested in the big wireless carriers. I see more opportunity in a company that’s designing and developing the fiber optic platform to enable 5G connectivity.

Clearfield, Inc. (CLFD) started operations as APA Enterprises with the acquisition of fiber connectivity operations from Americable and Computer System Products in 2003. But, by 2007, the company changed gears (and names!) and reinvented itself as a leading provider of fiber optic management, protection and delivery products.

The company’s “fiber to anywhere” platform was designed to not only meet the needs of broadband service providers, but also cut down on the costs associated with the deployment, management, protection and scalability of fiber optic networks. Clearfield’s “game-changing” Clearview Cassette is the building block of its FieldSmart product portfolio of cabinets, enclosures, panels and wall boxes. All of which are designed with flexibility, service and network migration capabilities.

Recently, Clearfield introduced the StreetSmart Small Count Fiber Hand-Off Box, which was developed to streamline a provider’s ability to extend fiber networks even further into the network at a more economical price. The product is expected to support not only 5G network rollouts, but also the rollout of fiber-to-the-premise (FFTP) and wireless access services.

With 5G spreading across the country, from urban city centers to rural areas, it’s not surprising that Clearfield has seen strong demand for its products—or that it posted record results recently.

During the fourth quarter in fiscal year 2021, sales increased 66% year-over-year to $45.2 million, while earnings per share surged 141% year-over-year to $0.53. The analyst community was expecting earnings of $0.39 per share and sales of $38.25 million, so Clearfield posted a 35.9% earnings surprise and an 18.2% sales surprise.

The stunning fourth-quarter results added to an impressive fiscal year 2021. Full-year sales rose 51% year-over-year to $140.8 million, topping estimates for $133.76 million. Full-year earnings soared 178% year-over-year to $20.3 million, or $1.47 per share, up from $7.3 million, or $0.53 per share, in fiscal year 2020. Analysts were expecting full-year earnings of $1.31 per share.

Top Stock #6: HIMX

Taiwan’s Himax Technologies, Inc. (HIMX) provides semiconductor solutions that are used in display imaging processing in consumer electronics. With more than 2,500 patents, Himax Technologies is a leader in display image processing semiconductor solutions. Its display driver integrated circuits (ICs) and timing controllers are used in laptops, tablets, mobile phones, car navigation systems, televisions, digital cameras and much more. And the company also develops controllers for touch screens.

Third-quarter revenue jumped 75.4% year-over-year to $420.9 million, falling short of analysts’ estimates for $424.3 million. Third-quarter earnings were in line with analysts’ expectations for $0.80 per ADS, which represented a 1,043% year-over-year increase.

Looking forward to the fourth quarter, Himax Technologies expects revenue to rise between 4% and 8% quarter-over-quarter. Fourth-quarter earnings per ADS are forecast to be between $0.78 and $0.83, slightly lower than analysts’ current estimates for $0.89 per ADS.

Top Stock #7: SSTK

Founded back in 2003, Shutterstock, Inc. (SSTK) is a tech company that provides an online platform and marketplace for licensed images. Businesses of all sizes from around the world rely on Shutterstock to supply photos, videos, music clips, vectors and illustrations for their communication needs.

In fact, Shutterstock boasts that it has customers in more than 150 countries and its online platform is available in 21 different languages. A few big-name brands that rely on Shutterstock’s services include Google, BuzzFeed, CapitalOne, Aol., AMC and Marvel

More than one million contributors add to Shutterstock’s offerings. As a result, the company provides access to more than one billion images, music clips and videos. And its image library contains more than 300 million images, with 200,000 images added each day.

Third-quarter revenue rose 18% year-over-year to $194.4 million, topping forecasts for $185.84 million. Adjusted third-quarter earnings dipped 13% year-over-year to $0.70 per share, but beat analysts’ estimates for $0.58 per share by 20.7%.

Shutterstock noted that it experienced a 32% increase in subscribers during the quarter, and it now has 336,000 subscribers. Subscriber revenue also rose 21% year-over-year to $81.5 million. The company’s image collection now contains about 390 million images.

Top Stock #8: INMD

More than 20 years ago, InMode Ltd. (INMD) was founded by a group of doctors and scientists who developed light, laser and radiofrequency devices for several minimally invasive procedures, including body and face contouring, hair removal, liposuction, skin tightening, facial skin rejuvenation, wrinkle reduction, muscle stimulation and fat reduction.

The company’s third-quarter revenue soared 58% year-over-year to $94.2 million, with surgical technology platforms accounting for 73% of quarterly revenue. Analysts were expecting third-quarter revenue of $89.26 million.

Third-quarter earnings surged 77.4% year-over-year to $0.55 per share, up from $0.31 per share in the same quarter a year ago. Analysts were looking for earnings of $0.50 per share, so InMode posted a 10% earnings surprise.

Looking forward, InMode expects full-year revenue between $343 million and $347 million and earnings per share between $1.91 and $1.93. That’s up from earnings of $1.05 per share and revenue of $206.11 million in fiscal year 2021. This forecast is also nicely higher than analysts’ current expectations for full-year earnings of $1.86 per share and revenue of $341.03 million.

Top Stock #9: CAJ

Back in the early 1930s, Precision Optical Instruments Laboratory was founded to research quality cameras in Tokyo, Japan. In 1934, the company developed the first 35 mm focal-plane-shutter camera in Japan, naming it the Kwanon. Within a year, the “Canon” trademark was registered—and the rest, as they say, is history!

Today, Canon, Inc. (CAJ) is synonymous with not only high-quality cameras but also office multifunction devices (MFDs), printers, copiers, scanners, camcorders, projectors, x-ray systems, ultrasound equipment, radiography systems, MRI systems, semiconductor lithography equipment, OLED display manufacturing equipment, flat panel display lithography equipment and more.

In 2020, sales of its office products accounted for 46% of total sales, while imaging systems (cameras) accounted for 23%. Canon achieved total 2020 sales of 3.16 trillion yen, or $30.39 billion.

At the end of July, Canon released results for its second quarter in fiscal year 2021. Second-quarter sales increased 31% year-over-year to 881.93 billion yen, or $7.95 billion. Second-quarter earnings came in at $0.53 per share, which topped estimates for $0.41 per share.

Looking forward to the third quarter, Canon is expected to achieve 114.3% year-over-year earnings growth and 15.4% year-over-year sales growth. Analysts have also upped earnings estimates over the past three months, so another quarterly earnings surprise is likely.

Top Stock #10: DAVA

Endava Plc (DAVA) was founded in 2000 with a vision of revolutionizing the relationship between technology and people. Simply put, Endava is a technology services company that helps its clients better engage with their users or customers. The company partners with financial, insurance, media, retail and telecommunications companies around the world.

Endava offers several solutions across the digital evolution, agile transformation and automation areas. The company provides a Digital Strategy solutions, including the design, development and engineering and integration lifecycle for a business. To increase employee collaboration, Endava offers Agile Transformation practices and solutions to understand challenges, as well as define and develop processes. And to help businesses be more productive in taking product concepts to operation, Endava engineers develop and implement Automation strategies, which includes infrastructure and software development.

First-quarter revenue jumped 55% year-over-year to 147.5 million pounds, up from 95.1 million pounds. Adjusted earnings surged 92.5% year-over-year to 28.3 million pounds, compared to 14.7 million pounds in the same quarter a quarter ago. Adjusted earnings per share came in at 0.49 pounds, topping analysts’ estimates for 0.43 pounds by 14%. The company now has 93 clients with more than one million pounds in revenue.

Looking forward to the second quarter in fiscal year 2022, Endava anticipates revenue between 150 million pounds and 152 million pounds, or 47% to 49% year-over-year revenue growth. For fiscal year 2022, the company also expects revenue between 615 million pounds to 620 million pounds, which represents 40% to 41% annual revenue growth. Full-year earnings per share are forecast to be between 1.71 pounds and 1.76 pounds, compared to 1.30 pounds in 2021.

Top Stock #11: STX

Back in 1978, Seagate Technology plc (STX) was originally founded as Shugart Technology, but the company changed its name in 1979 and hasn’t looked back. In fact, for more than 40 years, Seagate Technology has been at the forefront of data storage solutions. The company introduced the first 5.25-inch hard disk drive (HDD) in 1980, and by 1982, Seagate Technology had captured half of the market for small HDDs. By 1984, the company was the largest producer of 5.25-inch HDDs in the world.

Over the next two decades, Seagate Technology went on to reveal the Barracuda HDD, the first HDD with 7200-PM spindle speed, and the Cheetah 4LP, the first HDD with 10K-RPM spindle speed. In 2001, Microsoft (MSFT) selected Seagate Technology’s HDDs for its Xbox game consoles. And in 2008, the company shipped its one billionth HDD.

So, it’s no wonder that Seagate Technology is the leading data storage solutions provider today, offering products that provide storage for and access to large amounts of data. In fact, along with its HDDs, the company also provides solid state drives (SSDs), solid state hybrid drives and storage subsystems. And its products are in high demand…

For its first quarter in fiscal year 2022, revenue increased 34.6% year-over-year to $3.12 billion, up from $2.31 billion in the same quarter a year ago. Analysts were expecting total first-quarter revenue of $3.1 billion. First-quarter earnings surged 152.7% year-over-year to $2.35 per share, compared to $0.93 per share in the first quarter of 2021. That topped forecasts for $2.21 per share by 6.3%.

Given ongoing demand from its cloud data center customers, as well as the strength of its video and image applications, Seagate Technology expects to achieve second-quarter earnings of $2.35 per share and revenue of $3.1 billion. That compares to earnings of $1.29 per share and revenue of $2.62 billion in the second quarter of 2021.

Sincerely,

Signed:
Louis Navellier