It’s been a tough start to 2022 for the U.S. stock market. Concerns about rising Omicron cases and sooner than expected interest rate hikes have put the S&P 500 in a 3.6% hole just one week into the new year.
Not all sectors have performed poorly though. Energy and financial stocks are off to a great start thanks to soaring oil prices and rates, respectively. Most of the names that have already posted double-digit percentage returns belong to these sectors.
With the current tailwinds likely to support 2022’s early outperformers for some time, momentum investors may have an opportunity to strike while the iron’s hot—but not too hot. These are three week-one winners that appear to have plenty more upside.
What is a Good Oil Services Stock?
Liberty Oilfield Services (NYSE:LBRT) came out swinging on the first two trading days of the year en route to a 25% week one gain. With the mid-cap hydraulic fracturing services provider still trading well below its post-pandemic peak and favorable energy sector dynamics likely to persist, the run has probably just begun.
There are many onshore oil and gas service providers in North America, but Liberty Oilfield Services stands out because of its expansive geographical footprint. Early last year, the company acquired OneStim, the hydraulic fracturing business previously owned by industry giant Schlumberger. This significantly increased Liberty’s presence in key U.S. and Canadian basins at a time when oil fracking activity was taking off.
For this year, economists are forecasting that crude oil prices will remain elevated and supportive of increased production activity. Liberty and its peers will, however, face industrywide supply chain challenges and cost inflation pressures, not to mention recent concerns about the impact of Omicron on global oil demand. Still, analysts are expecting that the company will return to profitability in 2022. Look for the stock to trend back into the teens in anticipation of some stronger quarterly results.
Is Citizens Financial Group Stock a Buy?
Rhode Island-based regional bank Citizens Financial Group (NYSE:CFG) kicked off the new year in style by surging to an all-time high last week. It participates in a sector that isn’t usually associated with high-flying stock performances, but given the recent trajectory of U.S. interest rates, it may be a solid momentum play.
Ten days into 2022, the 10-year Treasury yield has soared to its highest level since January 2021. This is because the market thinks the Fed will tighten monetary as soon as March based on the minutes from the recent FOMC meeting. The potential for faster rate hikes has investors bidding up well-run regional banks like Citizens Financial which jumped 15% to start the year.
Citizens is expected to be one of the biggest beneficiaries of rising rates due to their strong commercial banking business. The company’s target market encompasses a wide scope of commercial customers by size and industry including exposure to some of the fastest-growing segments like technology, energy, healthcare, and real estate.
While much of the attention is on rising rates, Citizens merits extra attention on account of its recent M&A spree which has reduced its dependency on traditional banking revenue. Last month it announced an agreement to buy private investment banking firm DH Capital to strengthen its corporate advisory arm. A month prior, it wrapped up its acquisition of capital markets firm JMP Group to boost its capabilities in strategic advisory services, equity research, and trading.
Citizens Financial Group is trading near a record high, but at 10x last year’s earnings and more diversified revenue streams ahead, it is looking like a wise investment here.
Will Ford Motor Stock Keep Going Up?
Ford Motor (NYSE:F) sped out of the gate with a 20% run through January 7th. The stock went into overdrive due to a pair of powerful press releases that bolstered the automaker’s clout in the electric vehicle (EV) space.
First, Ford announced that it plans to almost double the annual production of its F-150 Lightning electric truck to 150,000 units. The move came in response to increasing customer demand for the popular, high mileage vehicle which is slated to be delivered this Spring. Ford is also seeing “unprecedented demand” for its Mustang Mach-E and will also ramp production of that EV this year.
On the heels of this accelerant, Ford announced that it sold a record 12,284 EVs in December. This capped off a strong year for the company’s EV division which trailed only Tesla in terms of full-year sales volume. Much of the growth was tied to Mustang Mach-E sales, but with the F-150 Lightning and the E-Transit all-electric van scheduled to roll off the assembly lines this year, Ford’s EV platform will only gain steam in 2022.
The market continues to play catch-up with Ford’s valuation. The stock finished 2021 on a five-month winning streak that looks poised to stretch to six. At 12x this year’s earnings estimate, Ford remains one of the most underappreciated ways to invest in EV growth.
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