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Best Stocks and the Worst and How to Invest 2022

In this post, we’ll review the best and worst stocks in the portfolio so far, and reveal the best way to invest in 2022!

Our Bow Tie Nation portfolio is up almost 30% this year and beating the market by 13%! That’s a return any portfolio manage would sell his soul to achieve but it’s time to look at those stock picks to see which were skill and which even a trained monkey could have picked.

In this video, we’ll review the best and worst investments in this year’s portfolio to see what we can learn about picking stocks. I’ll cover the losers as well as the winners to help make you a better investor. Then, I’ll reveal the three trends I’m watching for 2022 and the stocks to keep an eye on for next year’s returns!

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Our portfolio on Stockcard is up almost 30% to the first week in November with 29 of the 46 stocks beating the market. That’s two out of three stocks outperforming and 33 of the stocks are in positive territory.

I’ll leave a link to Stockcard below. Click through and then go to Portfolios in the top menu, you’ll find the Bow Tie Nation portfolio in this Stock Picks section. It’s free to follow and you’ll get email notifications whenever I buy or sell from the portfolio.

As a special bonus, I’ve negotiated an exclusive discount for everyone in the community. Use the promo code bowtienation for an exclusive discount beyond the free trial, plus…Stockcard is going to double the discount through the rest of the year.

Sign up on Stockcard for free and make stock-picking easy with the research tool I use! Use promo code: bowtienation for an exclusive discount!

Best and Worst Stocks So Far

Let’s look at those best stocks and the worst to see what we can learn, then I’m going to show you my starting strategy for stocks in 2022!

Our best performer, a 163% return on shares of Diamondback Energy, ticker FANG, and this is a great lesson in doing that deep research into a sector and being able to forecast the trends.

I watched rig counts, the number of rigs pumping oil, plunge last year but saw that conflicting with increased oil demand coming on economic growth. That research paid off and three of our top six stocks were in the energy sector including Devon Energy and Marathon that beat the market by more than 45% each.

Nation, Peter Lynch is quoted as saying “Invest in what you know,” but that’s only possible by doing the kind of deep research to really understand how an industry and the companies makes money.

Wells Fargo, ticker WFC, was another winner with a 70% return and beating the market by 41% over the year.

Everyone said I was crazy for adding Wells Fargo. Not only were bank stocks lagging but Wells was still in the doghouse with investors. But you have to know when to play contrarian, when to bet against the market and the best time to do it is when you can find a cheap stock in an industry ready to run on those big trends. That’s what I saw in Wells Fargo, an inexpensive stock nobody loved in a group of stocks ready to take off on higher interest rates.

We’ve also has some great stocks in the consumer play like Dick’s Sporting Goods, ticker DKS, and its 81% return.

In fact, I added more consumer stocks to the portfolio last month and they’re already up an average 16% so this is a trend that looks like it’s still got room to run. Households have trillions in excess savings, the job market is strong and they’re ready to spend it.

Sign up on Stockcard for free and make stock-picking easy with the research tool I use! Use promo code: bowtienation for an exclusive discount!

But it wasn’t all rainbows and unicorns with the portfolio and sometimes the best lessons are straight from our failures. Seventeen stocks in the portfolio underperformed the market but two standout as real dogs, WW International and Clorox.

Weight Watchers, ticker WW, was really disappointing because the shares were up 64% in less than six months after adding them then crashed 73% in the next four.

And this is part of the reason it really is best to have at the most twenty or thirty individual stocks in your portfolio. That’s about the max you can keep up with on an individual basis.

For example, if I had been following fewer companies, I might have taken a more frequent look at Weight Watchers. I could have tied the idea of renewed lockdowns from the Delta variant with the idea that people would be less concerned about their weight and numbers would suffer. That’s what ultimately happened, the company has seen declining membership over the last four months and that’s hitting the shares. Now I still like the stock back up to $30 a share but it’s going to be a while before it gets back up to the peak.

The other big loser of the year was Clorox, ticker CLX, and an 18% loss on the shares…underperforming the market by 42%!

Clorox was down from the start and really the canary in the coal mine for inflation and weakness in consumer staples companies. This is why I like following those big trends because it will alert you to forces that a stock just can’t overcome, but I failed in that on this stock. I still like the dividend on this one and it’s a good company but the entire consumer staples group is going to struggle with inflation.

Bow Tie Nation Portfolio

How to Invest in 2022

Even with those few bad picks, I’m still extremely happy with that 30% portfolio return and will take a market-beating 13% any day of the week. But you can’t rest on your successes. Every year is a new opportunity for returns so I want to start us off with a 2022 strategy and we’ll start adding stocks to the portfolio next month.

Just like with this year’s strategy, I’m going to use that big picture view to look for the trends and then pick stocks from that. All you out there in the Nation know, this is my favorite way to invest because it’s so much easier to see those big picture trends and forces than it is to just randomly pick the best stocks from thousands in the market. By starting with those trends, you narrow your list to a few hundred in sectors and industries. You can also be more confident that, even if you don’t pick the very best stock in the group, you’re still going to do well because those trends are pushing all the stocks in that group higher.

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And there’s three trends I’m watching closer than anything for 2022; inflation, interest rates and the tight jobs picture.

Consumer inflation has been over 5% for six months now and likely to stay that way well into next year. It’s a multi-decade high for price increases and the market is just starting to price it into stocks. That means there’s still some opportunities left but more importantly, you still have a chance to protect your portfolio against some of the risks.

You see, along with the trend in jobs I’ll get to next, corporate earnings could get slammed next year on high inflation and wages. Some companies will be better able to pass those higher costs on to customers but others won’t and that understanding needs to be a top priority in the stocks you buy.

So here, I’m thinking stocks in the Energy and Real Estate sectors which tend to do better during periods of high inflation while avoiding stocks of consumer staples companies and utilities that could get hit. I’m also looking at companies in the materials sector, those miners, and energy stocks that could actually benefit as inflation rises.

Related to that inflation theme is going to be higher interest rates, another major trend to affect stocks in 2022.

interest have doubled over the last year and how to invest in 2022

The interest rate on the 10-Year Treasury, the benchmark for all other rates, has doubled in the last year, that is a HUGE move in borrowing rates, it’s not over yet and it will affect the market.

For example, when the rate on that 10-year bond increased less than a percent in the first three months of the year, tech and growth stocks got absolutely crushed. Stocks in the Nasdaq index, the green line here, lost 8% and the growth stocks in the Ark Innovation Fund plunged 33% in just a few months.

And interest rates are expected to keep moving higher, up to 2% by the end of the year and this is directly tied to inflation so could go much higher.

So if we’re thinking higher interest rates, we want to avoid tech and growth stocks unless it’s a company you really like or have a very long-term view on it. Instead, you want to add some stocks from the financials sector like banks because they’ll make more money on their loans when rates go up.

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Those bank stocks were some of our best performers this year and I’m looking for others to put in our 2022 portfolio.

The third market trend I’m following, the crazy tight jobs picture, is a big one. I worked for the State of Iowa as a Labor Economist for five years and can tell you without a doubt, this is the best jobs market for workers we’ve ever seen.

how to invest in 2022

There are now more than 11 million job openings but only eight million people looking for jobs. Even though the October jobs report was better, the previous two monthly jobs reports have come in surprisingly bad with just 194,000 jobs created in September versus 500,000 expected because…employers just can’t get people to take those jobs.

The Labor Force Participation Rate, that’s the percentage of eligible workers employed or looking for a job, is now just 61.6%…that’s the lowest it’s been since 1976!

September's jobs creation news

Case in point, the website for the community bank I use has a notice…due to staffing shortage, ALL lobbies are closed! Can you imagine that? All nine locations, forced to close because they can’t find enough workers.

Between millions retiring over the last few years, people dropping out of the workforce on their investing profits and people that are still afraid to go back to work…there is a historic worker shortage and it’s going to lead to higher wage pressures next year.

Now that’s great for workers but companies are going to get slammed on those higher costs. For a lot of industries, employee wages are a third or more of their total costs. Increasing that will destroy profits and hit their stocks.

Sign up on Stockcard for free and make stock-picking easy with the research tool I use! Use promo code: bowtienation for an exclusive discount!

Some analysts are recommending the freelancer and work-from-home stocks like Fiverr, Etsy and Shopify on the trend…and they could be good picks, but I’m looking in a different direction. I’m focusing on stocks of companies with a greater percentage of their sales from online compared to peers.

That focus on ecommerce means these companies won’t have the staffing needs and won’t have to fight for workers. Profitability won’t get hit and the stocks will outperform.

In fact, this is a theme we’ve already highlighted in the three October stock picks; adding Tapestry, Signet and Capri Holdings to this year’s portfolio and producing nearly a 16% average return in less than three weeks.

All three of the companies have focused on strong ecommerce growth and it’s coming through in the bottom line. We’ll be looking for more companies like that for our 2022 portfolio starting next month! May your 2022 portfolio be always be winning!

Read the Entire Investing Series

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