Blogs -Top 5 Stocks Of 2022: Year In Review

Top 5 Stocks Of 2022: Year In Review


January 11, 2023

author

Beth Kindig

Lead Tech Analyst

This article was originally published on Forbes on Jan 6, 2023,09:04am EST

In this analysis, rather than prognosticate on the top stocks of 2023, we think it’s more productive to go back and review the stocks that performed well under new macro conditions in 2022. This exercise helps to inform tech portfolios for the upcoming year as investors can reasonably assume 2023 will look more similar to 2022 than the preceding years.

2022 was a very volatile year for the stock market with rising rates, inflation, and geopolitical tensions leading to sudden sell-offs. All three main U.S. indices ended the year with negative returns, with Dow Jones Industrial Average down 6.86%, S&P 500 index down 18.11%, and Nasdaq down 32.54%. Despite the indexes being in the red, some stocks greatly outperformed the broad market.

We think it’s important to pause and draw some parallels around the stocks that performed well in 2022 to form an opinion on what might perform well in 2023. This is assuming macro will be more similar to 2022 than the preceding years, which is a reasonable assumption to make at this time.

Below, we review the top five stocks of 2022. These stocks were chosen based on their price action and strong fundamentals. Choosing a top 5 means many great stocks were left off this list, yet this sample helps to form conclusions around how 2022 was a different trading environment from years past.

Stocks Market Trends 2022

Source: Ycharts

Sign up for I/O Fund's free newsletter with gains of up to 221% - Click here

Super Micro Computer (SMCI)

Super Micro Computer stock had 2022 returns of 86.8% and is the best-performing stock in our tech universe. Below is a chart that shows the quarterly year-over-year revenue acceleration Super Micro posted in 2022, which helped support its 2022 winning streak.

Super Micro Computer Quarterly Growth

Pictured above is SMCI’s Qly revenue YoY growth. - Ycharts

The company provides server and storage solutions to data centers, cloud computing, 5G, AI, and edge computing markets. The company was recently added to the S&P MidCap 400 Index and enjoys tailwinds from leading semiconductor companies such as AMD, Nvidia, and Intel.

In the recent earnings call, the founder and CEO of the company, Charles Liang said, “For Intel, we are engaged with many large opportunities with Intel’s upcoming Gen 4 scalable Xeon CPU codenamed Sapphire Rapids. We now have hundreds of early seeding engagements including several dozen early shipments. Similar programs have been executing with AMD, and we have seen very strong demand for our upcoming Genoa CPU based platforms.”

With respect to NVIDIA, not only do we have the most complete portfolio of systems supporting H100 GPUs, but we have also developed many brand new architectures for the leading Metaverse and Omniverse partners.”

The company’s revenue in the recent quarter, Q1 FY23, grew by 79% YoY to $1.85 billion. The gross margin improved to 18.8% in Q1 FY23 up from 13.4% in the same period last year. The company’s profits have grown steadily with net income of $184 million compared to $25 million in the same period last year. The stock is currently trading at a P/E ratio of 10.3 and a fwd P/E ratio of 8.1.

Super Micro Computer Total Return

Source: Ycharts

Microsoft (MSFT)

Microsoft was one of the best performing tech mega cap stocks last year ending the year down (28%), compared to Meta and Tesla, which ended the year down (64%) and (65%), respectively. Notably, Microsoft narrowly beat the Nasdaq in 2022.

The company is positioned for outsized growth due to its exposure to secular tailwinds such as Artificial Intelligence (AI), Machine Learning (ML), and the build out of the 5G edge network. Microsoft could take a substantial share of these markets at the infrastructure level due to its relationships with the Fortune 500 and Global Fortune 2000.

In addition to top-down enterprise penetration across the Fortune 500, Microsoft is also focused on developers to help complete Microsoft’s customer cloud strategy. Microsoft addressed its previously poor reputation in open-source communities by acquiring GitHub for $7.5 billion in 2018. Developers help determine the cloud IaaS service an enterprise or SMB customer will choose, so in-roads into this community could help Microsoft hedge the developer favorite, Amazon Web Services.

The company’s Q1 FY23 revenue grew by 11% YoY and down 3.4% QoQ to $50.1 billion.

Operating income increased by 6% YoY to $21.5 billion. Net income was $17.6 billion compared to an adjusted net income of $17.2 billion in the same period last year (adjusted net income in the previous year as the company received income tax benefit last year).

The net profit margin was 35% in the recent quarter.

Microsoft has proven it has many levers it can pull during a tougher macro compared to its mega cap tech peers – primarily seen in the consistency of its profit margin.

Microsoft and tech peers profit margin compared

Source: Ycharts

Due to Microsoft being a leading tech stock that the I/O Fund plans to buy on any weakness, we have included a YouTube clip from Portfolio Manger Knox Ridley of the 2023 price action we are expecting for Microsoft including sample entries.

Subscribe to I/O Fund's Essentials:

The I/O Fund has launched a new $99/year Premium Newsletter called "Essentials" -- this newsletter delivers premium samples for our readers who want more actionable analysis for their tech portfolios. This month, we released a stock pick that we believe will be a leader in 2023 plus a video with the buy plan.

ASML Holding (ASML)

ASML Holding is benefitting from strong semiconductor equipment demand from the leading foundry companies. As new fabs are built, these companies will need equipment in the coming years. The company’s fiscal year 2022 revenue analysts estimate rose 12% in the last 2 months. The company raised the 2025 revenue guidance to be between €30 billion and €40 billion, up from the previous guidance of €24 billion to €30 billion. The company in its press release acknowledged“While the current macro environment creates near-term uncertainties, we expect longer-term demand and capacity showing healthy growth.”

The company’s Q3 revenue was €5.8 billion compared to €5.2 billion in the same period last year. The management expects Q4 revenue to be between €6.1 billion to €6.6 billion. The gross margin was 51.8% compared to 51.7% in the same period last year. Net income was €1.7 billion (net profit margin of 29.4%) compared to a net income of €1.7 billion (net profit margin of 33.2%) in the same period last year.

The company has a strong backlog of over €38 billion. The company’s CEO Peter Wennick said in the earnings call, “And as a matter of fact, our 2023 shipment demand is still significantly above our build and shipment capacity for next year. And this is supported by the record bookings this quarter, of €8.9 billion and our largest backlog ever of over €38 billion. Almost 85% of this backlog is for EUV and immersion, which is used for advanced nodes and related wafer capacity expansions.”

Palo Alto Networks (PANW)

Leading cybersecurity company Palo Alto Networks has a strong free cash flow margin, which is rare in the cloud and cybersecurity category. The company has been GAAP profitable for the last two quarters. The company’s revenue in the Q1 FY23 grew by 25% YoY to $1.6 billion, which was above the management guidance of $1.535 billion to $1.555 billion.

The company’s margins are improving. The company reported a GAAP net income of $20 million compared to a GAAP net loss of ($103.6) million in the same period last year. The adjusted net income was $266.4 million compared to $170.3 million in the same period last year. Consistent GAAP profitability is key in this macro environment.

The company reported free cash flow of $1.2 billion (76.6% of revenue) compared to $554 million in the same period last year (44.4% of revenue). Dipak Golechha, CFO of the company, said in the earnings call, “This cash flow performance was largely driven by strong collections in the quarter, that we expected based on the strength of our business in Q4.” The management has guided an adjusted free cash flow margin in the range of 34.5% to 35.5% for the FY23.

Dipak Golechha said, "We exceeded our top-line guidance while generating $1.2 billion in free cash flow and expanding our operating margins," He further added, "We will continue to balance growth with profitability and cash generation to further strengthen our position in the market."

Palo Alto Networks Free Cash Flow

Source: Ycharts

First Solar (FSLR)

Solar stocks were the leading sector in tech last year. First Solar ended the year on fire with a return of 72% compared to the (33%) return of the Nasdaq. The sector got a boost from the Inflation Reduction Act of 2022, which we covered last year in our free newsletter when we said:

“The solar industry will benefit since Inflation Reduction Act includes the extension of Production Tax Credits (PTCs) and Investment Tax Credits (ITCs) for the construction of wind and solar projects beginning before January 1, 2025. It means a three-year extension for PTCs and a one-year extension for ITCs.

It also extends the 30% federal tax credits for installing solar panels on rooftops by another 10 years, from 2022 to 2032. Solar installations are eligible for 26% tax credit for installations in 2020 and 2021. It now extends till 2032 for 30% tax credits, and in 2033 the tax credit will be reduced to 26% and 22% in 2034. There will be no tax credit after this period unless Congress renews it. Home battery systems that store energy generated by solar systems for later use will also be eligible for a 30% tax credit.”

First Solar is a leading provider of photovoltaic (PV) energy solutions. It is one of the major beneficiaries of the IRA in the form of solar manufacturing tax credits. The company was also recently added to the S&P 500 index.

The company announced last year its plan to invest $1.2 billion to expand its solar module manufacturing in the U.S. It includes a $1 billion investment for a new manufacturing facility in the Southeast U.S. and $185 million for the upgradation of the existing Ohio facility.

Mark Widmar, CEO of the company, said in the Q3 earnings call, “In our view, by passing and enacting the Inflation Reduction Act of 2022, Congress and the Biden-Harris administration has entrusted our industry with responsibility of enabling and securing America's clean energy future, and we recognize the need to meet the moment in a manner that is both timely and sustainable.”

The company’s Q3 2022 revenue was up 7.8% YoY to $628.9 million. It reported a net loss of ($49.2 million) compared to a net income of $55.8 million in Q2 2022 and $45.2 million in the same period last year. The company benefitted from the gain from the sale of the Japan project development platform in the Q2 2022 and also experienced higher logistics charges in the recent quarter.

Mark Widmar, CEO of First Solar said, “Our focus continues to be on setting the stage for long-term growth, and from this point of view, 2022 has so far proven to be foundational,” He further added, “This year we have developed the potential for our CdTe semiconductor technology by progressing our next-generation Series 7 and bifacial platforms, set in motion plans to scale our global manufacturing capacity to over 20 GWDC by 2025, and secured record year-to-date bookings of 43.7 GWDC with deliveries extending into 2027.”

Conclusion:

The I/O fund is an actively managed tech portfolio that is audited and we carefully choose our positions to reflect the current macro environment for tech. Therefore, our analysis is very actionable and I strongly feel that looking back at 2022 is providing clues for tech investors as we move forward into 2023.

This week, I recently stated on our research site’s private forum:

“My concern for retailers is that the underlying tone is that macro will clear up quickly and tech darlings will return. It's more likely macro will be throwing curveballs for some time. To put it another way, it's obvious that 2022 was terribly bad for investors, but what if the real issue is that the previous years were so terribly good/easy. Will those good/easy conditions return?

Part of the good/easy conditions was fueled by the venture capital cycle. When every tech company going public has high growth rates yet is losing on the bottom line, and it's clear the market is still awarding the poor bottom lines with sky high valuations, what you get is a runaway train of a bull market.”

The stocks above have proven they do not need good or easy conditions to perform well. It can be hard to have a repeat year as often investors will take gains, and there’s certainly gains to take in the names listed above. Therefore, we are looking for a pattern rather than attempting to exactly repeat 2022. This pattern is expanding margins, strong free cash flows, and any hint or sign of accelerating revenue.

Royston Roche, Equity Analyst at the I/O Fund, contributed to this article.

Gains of up to 403% from our Free Newsletter.

Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+344% on Nvidia

+403% on Bitcoin

+218% on Roku

*as of March 15, 2022

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 324% on Zoom, 601% on Nvidia, 445% on Bitcoin, and 4-digits on an alt-coin. The I/O Fund is audited annually to prove it’s one of the best performing Funds on the market with returns that beat Wall Street funds. 

beth

More To Explore

Newsletter

Investing In AI with Beth Kindig: 1-Hour Video Interview

Investing In AI with Beth Kindig: 1-Hour Video Interview

Jordi Visser, CIO and Chairman of Weiss Multi-Strategy Advisers, spoke to Beth Kindig on the Real Vision podcast on March 20th, to dive deep into AI’s potential for explosive economic growth, how to f

April 19, 2024
https://images.prismic.io/bethtechnology/Zh50DEaI3ufuUONy_SemiconductorStocksQ4OverviewAIGainsHeatUp.jpg?auto=format,compress

Semiconductor Stocks Q4 Overview: AI Gains Heat Up

Semiconductor stocks are standout performers so far in 2024, with investor appetite for AI stocks remaining elevated as AI chip leader Nvidia continues its streak of high growth.

April 15, 2024
I/O Fund Catapults to 131% Cumulative Performance Due to Leading AI Allocation

I/O Fund Catapults to 131% Cumulative Performance Due to Leading AI Allocation: Official Press Release

I/O Fund, a tech research site that actively manages a real-time portfolio, announces returns of 57% in 2023 with a cumulative return of 131% since inception. This compares to popular tech ETFs that h

April 03, 2024
The Importance of Verified Returns and Risk Management for Retail Investors

The Importance of Verified Returns and Risk Management for Retail Investors

Last year was a stellar year for investors – in 2023, the Nasdaq 100 rose 54% for its best annual return since 1999, while the S&P 500 gained 24%. The Magnificent 7 were the de facto leaders of this m

March 27, 2024
ARM Building

Arm Stock: AI Chip Favorite Is Overpriced

Arm Holdings is positioned to capitalize on the growing adoption of artificial intelligence (AI) technologies, leveraging its established licensing model and extensive ecosystem to drive future growth

March 26, 2024
Meta Building Picture

Top 3 Ad-Tech Stocks For 2024

Ad spending growth is widely forecast to accelerate in 2024, after a challenging macro environment significantly dented budgets and growth in 2023. The US advertising market is already showing positiv

March 18, 2024
Cybersecurity Apps

Cybersecurity Stocks: CrowdStrike Soars While Palo Alto And Zscaler Fall

This year has led to a split landscape for cybersecurity stocks, with two of cybersecurity leaders up more than 20% YTD while others are negative YTD. In the past, we’ve discussed the resiliency of th

March 10, 2024
The Magnificent 7 Are Falling Like Dominos; Only 3 Remain

The Magnificent 7 Are Falling Like Dominos; Only 3 Remain

The Magnificent 7 of 2023 have now become 2024’s Magnificent 3: Nvidia, Meta and Amazon. Of these, Nvidia’s saw a stellar start to the year as shares have gained nearly 60% YTD due to the GPU leader’s

March 05, 2024
Nvidia Stock Gained $1.5 Trillion To Surpass The FAANGs - Apple Is Next

Nvidia Stock Gained $1.5 Trillion To Surpass The FAANGs - Apple Is Next

Today, Nvidia surpassed a $2 trillion market cap compared to Apple’s $2.8 trillion. The company has surpassed Amazon, Google, Tesla, Meta and Netflix. The only one left standing is Apple and we have 2

February 28, 2024
https://images.prismic.io/bethtechnology/93644c8f-e9e6-4b61-944f-d7ebc957628a_Palantir+Stock+Surges+From+Artificial+Intelligence+Platform.jpg?auto=compress,format

Palantir Stock Surges From Artificial Intelligence Platform

Palantir’s Q4 earnings confirmed an acceleration in its US commercial business as it closed out its first GAAP profitable year. Shares are reflecting the optimism surrounding Palantir’s commercial seg

February 20, 2024
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2024
Get Free Weekly Analysis on the Best Tech Stocks