Humans are prone to recency bias. We tend to place more emphasis than is warranted on events that have happened in the recent past.
This type of bias can, for example, lead investors to assume that the best-performing stocks of one year will continue to be among the biggest winners in the next. That usually isn't the case. Looking ahead instead of to the past is a better investing strategy.
Case in point: Here are several stocks that didn't perform well in 2021 that should nonetheless have tremendous prospects in the new year. If you've got $5,000 to invest now, they could make you richer in 2022.
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1. Teladoc Health
Wall Street's consensus price target for Teladoc Health (TDOC 1.18%) stock over the next 12 months reflects a 67% upside potential. I think that the analysts' bullish view about this company is warranted.
It's quite possible that the spread of the omicron variant of COVID-19 could give Teladoc a boost in the near term. If new case counts stay as high as they have already become, or rise significantly from here, many individuals could once again start opting to use virtual care rather than visiting physicians in their offices. Teladoc enjoyed a big surge in virtual visits in 2020 thanks to the pandemic. It could very well see that happen again -- especially in the early part of 2022.
The company's contract with HCSC, the fifth-largest health insurer in the U.S., goes into effect next month, and its new virtual primary care service, Primary360, continues to gain momentum. So Teladoc should enter the new year with strong tailwinds.
But these near-term catalysts aren't the main reason to like this healthcare stock. Teladoc's market cap of around $15 billion is low compared to the long-term opportunity for virtual care. While I think the stock will make investors richer in 2022, its returns over the next decade should be even more impressive.
2. MercadoLibre
Analysts are even more optimistic about MercadoLibre (MELI -1.01%). The average price target for the stock is more than 60% higher than its current share price. I suspect Wall Street could be right again in this case.
MercadoLibre reigns as the biggest player in the Latin American e-commerce market. And that's a market that could more than double in value by 2025, according to Morgan Stanley.
E-commerce isn't its only focus, though. It also hosts the largest digital payments ecosystem in Latin America, and is a leading provider of logistics services to merchants in the region. Both of those businesses continue to grow rapidly.
If you look only at MercadoLibre's price-to-earnings multiple, you might think the stock is ridiculously expensive. However, its shares are actually trading at historically low levels based on its price-to-sales ratio -- a more meaningful valuation metric for MercadoLibre at this stage of the company's evolution.
3. PayPal
There's plenty of enthusiasm about PayPal (PYPL -1.19%) on Wall Street. The consensus price target for the fintech stock represents an upside of 43%. Could it really deliver that kind of gain in 2022? I think it's quite possible.
The company should have a happy new year in large part thanks to Amazon.com. Beginning in January, the world's largest e-commerce platform will allow customers to use PayPal's Venmo app to pay for purchases. PayPal CEO Dan Schulman said in the company's third-quarter earnings call that the Amazon deal marks "a very significant moment in our Venmo monetization efforts."
It also continues to win greater adoption for its payment apps in physical locations. Valero and Phillips 66 are adding support for PayPal QR codes in gas stations throughout the U.S. United Airlines now allows PayPal QR payments on flights.
With its shares trading at 35 times expected earnings, PayPal might not seem attractively valued. But based on the massive growth prospects for the digital payments space and the company's leading position in the market, I think it could truly be an explosive stock in 2022 and over the long term.
