2022 stock ideas for the second half

If you think this bear market won't last, here are some ideas in value, growth, and more.

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For many investors, it seems like a risky time to be in stocks. Since the early January 2022 all-time high, US stocks are down more than 20%, with the S&P 500 falling below 4,000 for the first time since March 2021.* High inflation for a range of goods, including oil, food, and many other products, is hurting most consumers and businesses, and it is driving the Fed to aggressively raise rates—to the detriment of stock prices. Add that on top of lingering COVID-19 economic symptoms, ongoing supply chain problems, geopolitical tensions, and other factors that are helping push stock prices down and you have quite a market for investors and traders to deal with.

But markets have a habit of bouncing back from large losses over time, and if you are an active investor who thinks there are opportunities in stocks, you might consider utilizing a stock screener to search the market for investing ideas that align with your goals.

Here are 3 stocks screens using Fidelity's Stock Screener, plus top results for each, to get the idea generation juices flowing.

Value stocks

With stocks officially entering bear market territory (a decline of 20% or more from a previous high) earlier this month, stock price valuations have come down dramatically from previous levels. The S&P 500's forward 12-month price-to-earnings (P/E) ratio—which is a relative measure of how expensive an index or stock is, with lower ratios considered to be more attractive—has dropped below 16, as of late June. That's down from a reading near 20 back in March, and is at its lowest point since the spring of 2020.

If you think the market is near a short-term bottom, you like the longer-term prospects of the market, and/or you think there are attractive investments to find after the bear market move this year, you might see this as an opportunity to search for stocks with attractive valuations. Of course, the market could have more room to go lower from here if investors remain broadly bearish, and it's important to keep an eye out for value traps (i.e., investments that appear to be trading at a relatively attractive price, but risks may prevent earnings and price growth).

There are a variety of valuation screening criteria that you might consider to search the market using the Fidelity.com screener. These include, but are not limited to, price multiples like P/E and price-to-book (P/B).

Here are the top 10 results, as of June 23, 2022, for a screen of medium- and large-cap stocks ($6.5 billion and above) with a low P/E ratio (11.27 and below), low P/E growth ratio (1.42 and below), and low P/B ratio (1.31 and below), sorted by market cap:

  • Toyota Motor ()
  • Wells Fargo ()
  • TotalEnergies ()
  • Micron Technology ()
  • BNP Paribas ()
  • UBS Group ()
  • Ford Motor ()
  • ENI SPA ()
  • American International Group ()
  • State Street ()

An important next step after running a screen is to evaluate the output. For example, are the results concentrated in a particular geographic region, sector, or other factor? This screen is notable for generating several financial stocks. A consideration when adding individual stocks to your portfolio is concentration risk within a particular sector or industry. Colloquially speaking, concentration risk can fall into the category of putting your eggs in a single basket—if you are not diversified across the rest of your investments.

Growth stocks

A dynamic that's been playing out thus far in 2022 is growth performing worse, broadly speaking, compared with value. The Russell 1000 Growth Index is down roughly 29% year to date. That compares to a 14% drop for the Russell 1000 Value Index and 20% decline for the S&P 500.

If you think growth will bounce back in the second half of 2022, there are a variety of growth-oriented screening criteria that you can use. For example, forward EPS growth, book value growth, free cash flow growth, and profit margin growth.

Here are the top 10 results, as of June 23, 2022, of a screen looking for medium- and large-cap stocks ($6.5 billion and above) with high forward 3-to-5 year EPS growth (16.3% and above), high 5-year average book value growth (17.4% and above), high 5-year average free cash flow growth rate (24.9% and above), and high profit margin (trailing 12 months), sorted by market cap:

  • Tesla ()
  • Nvidia ()
  • Advanced Micro Devices ()
  • Schwab ()
  • Micron Technology ()
  • KLA Corp ()
  • Nutrien ()
  • Digital Realty Trust ()
  • Global Payments ()
  • Arista Networks ()

A part of evaluating the output of a screen is to make an assessment as to whether the screen results are in line with what you might expect. Do they appear to align with your objectives? If the output generally seems unsuitable for your goals and risk tolerance in any way, you may want to consider adjusting the filters or running a different screen.

Income stocks

With the Fed aggressively raising rates, there are now an increasing number of alternatives to stocks that offer relatively competitive yields. The 10-year US Treasury yield is now around 3.4%, as of late June, compared with a 1.5% yield for the S&P 500. Of course, stocks have different characteristics compared with bonds and other investments that you might consider to meet an income-generating objective.

With that said, there are still ways to find stocks that offer competitive yields—if that's an important component to your strategy. Obviously, the relative income level of a stock should not be your only consideration when screening the market. Another factor that income-seeking stock investors might consider is volatility (particularly when volatility is relatively high, as it is now), as measured by something like standard deviation. You can also combine different screening characteristics, such as looking for value and growth alongside income.

Here are the top 10 results, as of June 22, 2022, of a screen for medium- and large-cap stocks (a market cap above $6.5 billion) with a high dividend yield (3.4% and above), a very low 5-year annualized standard deviation (0.71 and below), and a low P/E growth ratio (2.05 and below):

  • Novartis ()
  • Intel ()
  • GSK ()
  • Digital Realty Trust ()
  • Walgreens Boots Alliance ()
  • Telus ()
  • Koninklijke Ahold Delhaize ()
  • Telefonaktiebolaget LM Ericsson ()
  • Telefonica Brasil ()
  • Medical Properties ()

This list is dominated by foreign-based investments for domestic US investors. Foreign investments can entail unique characteristics and risks that should be fully understood before any investment is made. It also includes several real estate investment trusts (REITs), which have unique investing characteristics. If any screen result piques your interest, it's important to research it fully so that you understand what you are buying.

Dig deeper

These screens are meant to show how you can build a filter to find investing ideas that might align with your objectives. Some screening criteria may be more relevant for certain sectors, industries, and companies than other criteria. In addition to building your own screens such as the ones above, it's possible to utilize preset expert screens that can potentially generate ideas that could meet your objectives.

Regardless of your approach, there are a lot of economic risks right now, so you may want to approach the market with more caution than usual. With any stock screen strategy, more research is needed to determine if any of these investments are right for you. You should fully understand the risks involved, and each investing opportunity should be considered within the context of a well-diversified investment strategy that conforms to your specific time horizon, objectives, and risk parameters.

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