5 Best-Performing Stocks to Buy in December 2021

Despite the recent volatility, US stock markets are up in double digits for the year. However, the market has been quite polarized and a handful of stocks account for the bulk of S&P 500 returns. Here are the five best-performing stocks of 2021 that look good buys for 2022 also.

While the S&P 500 is on track to close the year with double-digit returns, for the third consecutive year, some sections of the market especially IPOs and SPACs (special purpose acquisition company) have been quite weak. A large number of IPOs and SPACs are trading below the IPO price.

1. Apple (NYSE: AAPL)

Apple stock was underperforming the markets as well as FAANG peers for the most part of 2021. However, the stock has looked strong over the last month despite the broader market weakness. With a YTD gain of over 30%, it is the second-best performing FAANG stock. If you are looking to buy a top-performing FAANG stock for 2022, Apple should be on your watchlist.

Apple is the second-best performing FAANG stock

Wall Street analysts have also been turning bullish on Apple stock. Today only, Citi analyst Jim Suva raised his target price on the stock from $170 to $200. “We do recognize that regulatory risks remain a major overhang on the stock, but we view these as headline risk rather that fundamental risk. … Apple’s current market value does not reflect new product category launches. This will change with the launch of the new AR/VR headset in 2022,” said the note.

The brokerage also expects Apple to scale up buybacks in the current fiscal year. Incidentally, Warren Buffett has also been supportive of Apple’s massive buyback program and the iPhone maker is the largest holding for Berkshire Hathaway.

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2. Pfizer (NYSE: PFE)

Pfizer is among the best-performing healthcare stocks in 2021. The rally gained momentum over the last month after the emergence of the omicron variant. Initial reports suggest that Pfizer and Moderna’s COVID-19 vaccines are effective against the omicron variant with a booster dose. Pfizer expects COVID-19 to become an endemic which would mean it would continue to reap revenues from the vaccine. Apart from the COVID-19 vaccine, the company is also developing several other drugs which would add shareholder value.

Pfizer is among the best performing healthcare stocks of 2021

After being among the best-performing S&P 500 stocks of 2021, Pfizer should continue its good run in 2022 as well. The next key driver for the stock would be the expected approval of its COVID-19 pill Paxlovid. Also, booster shots are expected to get an impetus across the world with Israel even going for a fourth booster shot.

Overall, PFE is one best-performing stock of 2021 whose outlook for 2022 also looks positive.

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3. Alphabet (NYSE: GOOG)

Alphabet is the best performing FAANG stock in 2021 and should continue its good run in 2022 as well. Earlier this month, UBS also increased the target price on the stock to $3,925. “We think Alphabet shares can see positive estimate revisions and multiple expansion on the back of faster than expected top line growth and margin inflection at Google Cloud. We think investors are overly dismissive of Cloud’s ability to move the needle based on the relative size of its potential EBIT contribution,” said UBS analyst Lloyd Walmsley in his note.

GOOG is the best performing FAANG of 2022

While GOOG underperformed the FAANG pack last year, it is the best performing FAANG name by a wide margin this year. The stock’s valuation multiples look reasonable and there looks scope for an expansion in multiples. The stock looks a good buy for 2022 and is among the quality tech names that have a secular growth story.

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4. Nvidia (NYSE: NVDA)

Thinking of best-performing stocks, it is hard to miss Nvidia. The stock has been outperforming the markets consistently and is up a massive 960% over the last five years. Notably, while most of the S&P 500 top gainers in 2021 underperformed in 2020, Nvidia is among those rare stocks that outperformed in both years. Nvidia has come off its 2021 highs and the crash looks like a golden opportunity to buy the stock at attractive valuations.

Nvidia has been consistently among the best-performing stocks

Brokerages also have a bullish opinion of NVDA stock and earlier this week UBS termed it as a top pick for 2022. Citi has also listed the company as a top 2022 pick. Apart from the chip business, NVDA stock is also a play on metaverse. If the regulators in the UK take a constructive view of Nvidia’s acquisition of Arm Holdings. It would also add long-term value for investors. The deal is facing heat in the UK over antitrust issues.

Overall, if you want to buy a best-performing stock, Nvidia is one name that should be on your radar.

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5. Wells Fargo (NYSE: WFC)

Bank stocks have outperformed in 2021 amid the rise in bond yields. Wells Fargo, which was once a top holding for Berkshire Hathaway is among the best performing bank stocks of 2021. The stock looks a good buy for 2022 as well as it moves past the multiple controversies of the last couple of years.

Wells Fargo is among the best performing bank stocks in 2021

Jefferies believes that Wells Fargo could continue to do well in 2022 as well. The brokerage named Wells Fargo as a top pick for 2022 and said that the stock is a good bet irrespective of the Fed’s policy moves. The stock trades at an NTM PE multiple of 12.8x and has a price-to-book multiple of 1.1x. It has a dividend yield of 1.67% which is above that of the S&P 500 even as it is below what some of the other banks offer.

Unless the economic conditions deteriorate significantly, the Fed looks on track to increase the interest rates sometime next year. Banks generally borrow at the short end of the curve and lend at the long end. In a rising rate environment, banks make a higher margin as compared to what they make in a low interest rate environment.

Withing the banking universe, Wells Fargo looks like a good buy despite it being among the best-performing stocks of 2021.

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