New Year, new you, new portfolio additions?
As we get ready to turn the page on 2021, I can't help but note how we've witnessed a pretty substantial market bifurcation in stocks over the past couple of quarters. Even though the broad market indexes have hit all-time highs, many growth stocks and small-cap plays have entered bear market territory. In other words, plenty of opportunity abounds, even with the major indexes near a record high.
A number of stocks on my watch list that I've not owned before are getting awfully close to levels where I may not be able to resist buying. Below are four stocks that I believe are likely to find their way into my portfolio in 2022.
A year ago, I was completely against electric vehicle (EV) manufacturer Nio (NIO 0.48%). The idea that an unproven automaker kicking out around 20,000 EVs annually could command a $90 billion market cap was so ludicrous that I never thought I'd consider buying it. And yet, here we are.
Roughly one year later I can say that I am thoroughly impressed with the way Nio's management has ramped up production in the wake of pandemic supply issues and higher inflation. I believe the company's innovation will drive market share gains in China for years to come.
In terms of production, Nio delivered close to 10,900 EVs in November, which puts it on an extrapolated run-rate pace of 130,000 EVs a year. By the end of next year, the company anticipates an annual run rate of 600,000 EVs. With Nio introducing three new EVs next year, as well as organically growing sales for its existing lineup of SUVs and its crossover EV, it could put Tesla Motors' ramp-up to shame.
I'm particularly impressed with Nio's battery-as-a-service (BaaS) program. With BaaS, buyers receive a discount on the initial purchase price of their vehicles, and are able to charge, swap, and upgrade their batteries over time. The benefit for Nio is improved customer loyalty to the brand and high-margin fee revenue for years after purchase.
If there's a pure-play EV maker that has my full and undivided attention, it's Nio.
In a market where most growth stocks are still valued at substantive premiums, some of the best deals can be found in the cannabis space. Marijuana stock Cresco Labs (CRLBF -1.97%) is one such name that I believe I'll pull the trigger on in 2022.
To address the elephant in the room anytime pot stocks are discussed, federal legalization would be nice, but it isn't necessary for weed stocks to thrive. With 36 states having legalized cannabis in some capacity, and the federal government allowing individual states to regulate their industries, there's a sizable path for marijuana stocks like Cresco Labs to succeed.
Like virtually all multi-state operators, Cresco Labs is working on building up its retail presence -- recently opening its 45th location nationwide. However, it's primarily focused on pushing into big-dollar limited-license markets, such as Illinois and Ohio. Markets where regulators purposely limit the number of retail licenses issued ensure that Cresco has a fair shot at building up its brand(s) and garnering a loyal following.
But the best thing about Cresco Labs is its industry-leading wholesale segment. Wall Street often writes off wholesale cannabis for its poor margins. But when we're talking about a company like Cresco, which holds a cannabis distribution license in California, the biggest pot market in the world, volume makes up for any margin concerns.
Another high-growth company I'm eyeing that I expect to add to my portfolio at some point in 2022 is biotech stock Novavax (NVAX 5.16%).
Somewhat similar to Nio, I was of the opinion that chasing COVID-19 vaccine stocks at the beginning of 2021 would be a poor move. In many instances, I felt COVID-19 stocks were grossly overpriced, especially not knowing enough about the disease and its variants. After another year of digesting data, I'm ready to crown Novavax as the most attractive COVID-19 play.
As some of you might already know, Novavax absolutely dazzled with its clinical trial data for NVX-CoV2373. A March-released U.K. study and a June-announced U.S./Mexico trial demonstrated respective vaccine efficacy (VE) of 89.7% and 90.4%. This makes Novavax one of three COVID-19 vaccine producers to hit a 90% VE level, which should allow it to become a key player globally.
The only reason Novavax's share price didn't blast off into the heavens has been its delays in filing for emergency-use authorization in key markets and production delays. Thankfully, these issues are being pushed into the rearview mirror, and countries are beginning to give Novavax a green light.
What's more, variants of the disease make it likely that COVID-19 becomes endemic. This suggests Novavax could be a winner from initial inoculations, booster shots, and possibly even combination vaccines with influenza, which the company is developing and testing.
Ping Identity Holdings
The fourth and final new stock that I'll likely add to my portfolio in 2022 is cybersecurity play Ping Identity (PING).
There are no shortage of double-digit growth trends investors can put their money to work in right now. But I believe the safest double-digit growth trend throughout the decade is going to be cybersecurity. It's evolved into a basic need service, and more businesses than ever are moving their data, and that of their customers, into the cloud. That's a recipe for success for third-party solution providers like Ping.
Like most high-performing security offerings, Ping's cloud-based platform is leaning on artificial intelligence. It's effectively becoming smarter at recognizing and responding to threats over time. Where Ping Identity can provide the greatest value is being layered atop on-premises solutions. Ping's infrastructure fills the gaps where on-premises security fails by providing continuous user monitoring, verification, and authorization.
Ping Identity is also making headway in its push to shift clients away from term-based subscriptions to software-as-a-service (SaaS) subscriptions. The latter should result in higher long-term margins and improved retention rates. Keep in mind that subscription gross margin is already hovering around a juicy 85%.
Whereas most cybersecurity stocks are still valued at nosebleed sales multiples, Ping is profitable and can be scooped up for about six times Wall Street's estimated sales for 2022. That's a heck of a bargain for what should be a long-term cybersecurity winner.