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Watch These 12 Nasdaq Stocks in 2022

By Dan Caplinger – Dec 13, 2021 at 8:41AM

Key Points

  • The Nasdaq moved lower early Monday afternoon.
  • The Nasdaq-100 index is doing its annual reconstitution.
  • It'll be interesting to see what happens with the six new stocks added to the index and the six stocks that are being replaced.

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How these companies do will affect the entire Nasdaq.

The stock market moved lower at midday on Monday, pulling back from some of its gains over the past week. As of 12:45 p.m. ET, the Nasdaq Composite (^IXIC) was down 146 points, or almost 1%.

Passive investing is a big part of what drives the stock market, and when it comes to Nasdaq stocks, the Nasdaq-100 index is among the most widely followed. Nasdaq made its announcement regarding the annual changes to the Nasdaq-100 over the weekend, and the implications for the stocks it added and the ones that it replaced are huge heading into 2022.

People with cranes putting numbers 2022 into place.

Image source: Getty Images.

The Nasdaq-100's annual reconstitution is based entirely on the market capitalization of the companies involved. Therefore, with some notable exceptions, stocks that have done well tend to replace stocks that haven't been able to keep pace. Below, we'll look at what happened and what to expect from the 12 Nasdaq stocks that got affected by the changes to the index.

Who's in

As you'd expect with the Nasdaq, tech stocks were well represented among the additions. Fortinet (FTNT 1.57%), Datadog (DDOG 0.55%), Palo Alto Networks (PANW 0.51%), and Zscaler (ZS -0.05%) all got invitations to join the Nasdaq-100, with market caps between $40 billion and $60 billion. It was particularly interesting to see three companies so closely tied to cybersecurity and threat protection get the nod all at the same time, but that highlights just how important those services have become in light of the acceleration in digital adoption in the past year. Datadog's data monitoring and analytics have also played a key role in helping businesses adapt to the changing environment.

By far the largest of the stocks to join the index was Airbnb (ABNB 0.85%), which went public right around the time last year's reconstitution happened. With a market cap above $110 billion, the disruptive accommodations provider has held up reasonably well even amid ongoing challenges from the COVID-19 pandemic.

Finally, electric vehicle start-up Lucid Group (LCID -0.61%) also made the cut. Lucid boasts a $60 billion market cap and has also gone public recently, leading a group of companies looking to stake their claim in the fast-growing EV market.

Who's out

Making room for these newcomers were six stocks that had seen mixed performance over the past year. In tech, perhaps the most surprising company headed out the door is IT services provider CDW (CDW -0.02%), whose stock has risen nearly 50% over the past 12 months. Nevertheless, with a market cap of just $26 billion, that just wasn't enough to keep the company in. Check Point Software Technologies (CHKP 0.29%), meanwhile, had seen its stock fall 8%, failing to keep pace with its fellow cybersecurity peers.

The other four companies getting the boot were diversely spaced across industries. Cerner (CERN) is technically a healthcare company, although its information management systems show its tech-heavy nature. Media giant Fox (FOXA 1.72%) (FOX 1.98%) was removed, as was online travel services provider Group (TCOM -0.30%) and biotech company Incyte (INCY 0.83%).

What to watch

The interesting thing to consider about these 12 stocks is the extent to which the Nasdaq's decision reflects past wins rather than future promise. For instance, the Dow Jones Industrial Average (^DJI 0.60%) is notorious for dropping companies that go on to outperform the stocks that they choose. This is often because the companies that get kicked out of the Dow tend to be solid value plays, with depressed share prices but blue-chip status to provide a foundation for a recovery. Meanwhile, companies that get added to the Dow are on high notes that leave them open for disappointment later.

In 2022, the Nasdaq-100 will look a lot different, and it'll be counting on its six new additions to outperform the stocks it left behind. Shareholders might have a different perspective, though, and that should have you watching all 12 of these stocks over the next year.

Dan Caplinger owns Datadog. The Motley Fool owns and recommends Airbnb, Inc., Datadog, Incyte, Palo Alto Networks, and Zscaler. The Motley Fool recommends Cerner, Fortinet, and Nasdaq. The Motley Fool has a disclosure policy.

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