But while it may have been difficult to keep up with all the new ways of investing, making money was pretty simple.
You didn’t need to pick and choose your investments – if you just parked your money in an index fund benchmarked to the S&P 500, you’d have enjoyed a nearly 27% gain in 2021. Even if you’d been more selective and chosen a specific industry to invest in, all 11 sectors of the S&P 500 rose last year – the energy sector led with a 53% gain, but even communication services, the worst-performing sector, returned 16%.
Unfortunately, the easy money may have dried up.
Experts from across Wall Street, including at Goldman Sachs and Morgan Stanley, believe that 2022 will be a “stock picker’s market.” They think that the days of the entire market rising are over, and it’ll be tougher to separate profitable investments from duds. Investors likely need to prepare their portfolios for a bumpier ride this year, and the sooner the better.
Of course, you could always sit on the sidelines and wait for investing inspiration – but with inflation at a 40-year high, cash could continue losing its purchasing power unless the interest rates on savings rise by enough to cushion that blow. Or, if you’re a long-term investor, index funds will likely serve you just fine again.
Either way, to help you get your personal investments in order for 2022, and perhaps make the most of your well-deserved 2021 bonus, we asked six financial gurus where they would put $10,000 right now. We sought specific, actionable picks from these experts, who include investment chiefs on Wall Street and acclaimed finance-newsletter writers with hundreds of thousands of readers.
Their recommendations are shared below, lightly edited for clarity and length in some instances.
Mark Reeth contributed to this article.
Bob Doll, the chief investment officer at Crossmark Global Investments
Bob Doll
Doll listed four stocks he thought would be among the most attractive options to plow $10,000 into.
With financial stocks well-positioned in a rising-rate environment, Doll said he liked Bank of America (BAC).
“The banks are more leveraged to the tailwinds that we see relative to economic growth, and earnings growth, and the yield curve potentially steepening at some point,” Doll, who was once the top equity strategist at BlackRock, said. “BAC is more leveraged for that. I think they have more opportunity to raise their profit margins than the other.”
Next, Doll said he liked the home-improvement retailer Lowe’s (LOW) for its relatively low valuation.
Finally, Doll pointed to two oil refiners: Phillips 66 (PSX) and Marathon (MPC).
The refiners “have some benefits from rising energy prices, and they also benefit as the spread widens between the price they pay for raw crude and the price at which they sell the refined products,” he said.
Genevieve Roch-Decter, the CEO of Grit Capital, Substack’s largest free finance newsletter
Investing 80% of one’s portfolio in large-cap stocks and 20% in “high-risk” areas of the market like small-cap stocks and cryptocurrencies is a smart strategy, Roch-Decter said.
Pullbacks in bitcoin (BTC) and ethereum (ETH) should be bought, the Grit Capital CEO told Insider, and investors should start to research altcoins – specifically those connected to decentralized finance (DeFi) – as well as play-to-earn coins like the one for “Axie Infinity.”
And those aren’t the only pullbacks Roch-Decter recommended buying. The recent weakness in stocks with exposure to the metaverse, like Nvidia (NVDA) and Unity Software (U), is a buying opportunity. Those companies have corrected 20% and 42%, respectively, off recent highs.
“I believe the metaverse will be a $1 trillion market one day,” Roch-Decter wrote in a message to Insider. “Nvidia has 83% market share in the GPU (graphics processing unit) market, according to Jon Peddie Research. That means Nvidia will support the majority of metaverse experiences. Unity because over 50% of everything that is RT3D (real-time 3D), which is needed for the metaverse, is built in Unity.”
The voluntary carbon market, which lets companies offset their emissions, is “exploding,” Roch-Decter wrote. She added that it grew from $300 million in 2019 to $1 billion in 2021. She added that Mark Carney, the Bank of England’s former governor, said the market could reach $100 billion by 2030.
“I own Carbon Streaming (NETZ-NEO) as well as Base Carbon (about to go public on the NEO stock exchange),” Roch-Decter wrote. “For those who want to play large cap, look at ETFs like KraneShares Global Carbon Strategy ETF (KRBN).”
One last pick from Roch-Decter comes from the financial technology, or fintech, field: Block, the company formerly known as Square (SQ). Shares are down nearly 50% from recent highs, and with digital wallets, crypto, buy now, pay later, and a move into DeFi, “this company has it all,” Roch-Decter wrote.
It has strong five-year projections for revenue, free cash flow, and earnings, she added, saying it’s an “expensive stock that’s worth it.”
Andrew Walker, a portfolio manager at Rangeley Capital and the founder of Yet Another Value Blog, a Substack newsletter about value-driven and event-focused investing ideas
Andrew Walker
Stocks connected to the home-broadband industry are, for the most part, too cheap, in Walker’s view. He told Insider that Charter (CHTR) and Altice (ATUS) were among his top picks but his favorite play right was Frontier Communications (FYBR).
“These businesses are perennially misunderstood and perennially a little bit undervalued,” Walker told Insider on January 7.
Walker’s bull case for Frontier is as follows: Years ago, the company levered up to buy a lot of Verizon Fios’ assets, but it mismanaged them and went into bankruptcy. Since then, Frontier has brought on a new management team and emerged with a very clean balance sheet. The new team is “absolutely fantastic,” and all of them have great backgrounds. he said. Frontier is trading for 5.5 to 6 times earnings before interest, taxes, depreciation, and amortization on trailing numbers, and fiber assets typically trade for 13 to 17 times. The stock recently traded for $30, though it had 150% upside.
“I could see a clear path to this being a $75 stock in the next year or two,” Walker said.
The case for Charter is simpler: It’s “fantastically managed,” and it had “probably the best manager in the cable business,” Tom Rutledge, Walker said. Charter has “a very clean balance sheet” and “very-low-cost debt,” the Rangeley Capital portfolio manager added. Its assets are undervalued, Walker added, so he predicted it would buy back shares.
His last stock pick, Altice, may raise an eyebrow or two; shares are down 58% since the start of 2021. The company has been “mismanaged” for the past couple years, Walker said, citing an example of the company trying and failing to build a mobile-virtual-network-operator strategy on its own.
Instead of the network launching faster and bringing more profits, Altice got “their dose of medicine,” Walker said. But despite the mismanagement and issues in recent years, Walker said its cable assets were way undervalued.
Lyn Alden, the founder of Lyn Alden Investment Strategy
Lyn Alden Investment Strategy
A number of fundamental economic indicators that Alden tracks are showing a risk-off scenario, she told Insider on Tuesday, and tighter monetary policy from the Federal Reserve could cause serious hiccups in the market this year.
In this rapidly shifting environment, investors may want to get defensive. Alden said she was doing this by buying diversified healthcare stocks, including insurers like CVS Health (CVS) and Cigna (CI) and pharmaceuticals giants like Bristol Myers Squibb (BMY) and Amgen (AMGN).
Energy pipelines also stand out, in Alden’s view, though for a different reason. In a high-inflation environment, yield-hungry investors can consider companies like Enbridge (ENB) and Enterprise Product Partners (EPD, which are two of Alden’s favorites, for steady income.
“Energy did very, very well last year,” Alden said. “I think there’s a lot of variance to how energy will perform in 2022, but the pipeline companies – especially the higher-quality ones – care less about energy prices and more about volumes, and they’re unusually cheap.
“And they offer very high yields. In an environment where stocks are more volatile, less going straight up, some of those relatively safe 6 to 7% yields that you get in that stage are pretty attractive.”
Besides defensively oriented US stocks and high yielders, Alden said “having a small allocation to foreign markets” through a broad emerging-market exchange-traded fund made sense.
“China had an unusually bad year in 2021 because all of the political risk came to a head,” Alden said. “2022 is shaping up to be a better year for that market.”
Cryptocurrencies also may be set for a strong year, even though trading has been choppy. Alden said the space “has a lot of regulatory and technical risk,” given that many cryptos are acting as high-risk securities.
One exception is bitcoin, which Alden said she’d been bullish on since April 2020. The largest crypto by market capitalization also has the long track record, is the most decentralized, and is “the most hardened against technical risk,” Alden said.
“The one that we have the most clarity on is bitcoin,” Alden said. “It doesn’t meet the definition of security; therefore, it’s a commodity. It’s property.”
Alden added: “I view bitcoin as the one institution-grade crypto that can be purchased. Zero allocation is no longer the right allocation for bitcoin. At least a couple percent – 1, 2, or 3% -makes sense for most people.”
Clay Gardner, the chief investment officer and co-CEO at Titan
Titan
On a longer-term horizon, Gardner said he most liked the so-called FAANG stocks: Meta (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), Microsoft (MFST), and Alphabet (GOOG).
He said they had attractive valuations and he didn’t see rising interest rates hurting their performance.
“Despite being ‘tech companies,’ they do not trade like other growth companies. They’re extremely reasonably priced in our view and, frankly, are some of the cheapest companies in the world relative to the scale and the business model,” Gardner said.
Gardner added that he liked the crypto space in the longer term (three to five years) as a smaller portion of a portfolio, in particular layer-1 blockchains outside bitcoin. These include ethereum (ETH), solana (SOL), avalanche (AVAX), and terra (LUNA).
“We see a lot of institutions leaping bitcoin entirely and jumping straight to other layer-1 protocols,” he said. Ethereum, for example, has “outperformed bitcoin on pretty much all metrics we’re looking at – number of users, transaction volumes settled, fees generated.”
Nate Geraci, the president of the ETF Store
The ETF Store
If you’re looking for an option that allows you to diversify your money more, you might consider an exchange-traded fund.
Geraci, the president of the ETF Store, shared two for investors to think about.
First is the Vanguard Total World Stock ETF (VT). The fund offers exposure to stocks around the globe, including the US.
US equities have outperformed the rest of the world over the past decade, but some say that is going to change. Geraci said the fund allowed investors to play both sides of the coin.
“It’s only a matter of time until the winds shift toward international stocks, and if you look at VT, it offers a one-stop shop in that it has approximately 40% exposure to stocks outside the US,” he said. “This allows investors to continue riding US stocks, while diversifying internationally in the event global stocks do start to outperform.”
For investors looking to take on more risk and betting on a rebound in crypto, Geraci highlighted the Global X Blockchain and Bitcoin Strategy ETF (BITS). The fund is weighted half bitcoin futures and half blockchain-related equities.
“The benefit of this approach is it mitigates some of the concerns over rolling bitcoin futures, which can create a performance drag,” Geraci said.