What Are The 5 Best Businesses to Invest In for 2022?
One of the easiest ways to invest money is by identifying trends before they become mainstream. For example, let’s say you had predicted how big the internet was going to be in the year 2000. You might have felt compelled to invest in a small company that was indexing internet pages… Google. Two decades later, even a small investment in Google would be worth a fortune today. This feeling of “I wish I had bought XYZ way back when” is incredibly common. Hindsight is always 20/20. The best thing that you can do now is to focus on the future. By identifying current societal trends, you’ll be able to discover the next best businesses to invest in.
The best part is that “identifying trends” is not the same as “picking stocks.” Picking stocks is a fairly risky strategy. In fact, most financial advisors don’t recommend it. For example, Google wasn’t the only company indexing the internet in the 1990s. WebCrawler, Lycos, Alta Vista and a few others were all around before Google. If you had invested in any of these companies instead of Google, you’d be out of luck.
Luckily, if you identify a trend that you think has potential, you don’t need to worry about picking the right company. Instead, you can just find an Exchange-Traded Fund that tracks your trend. ETF investing is a popular alternative to picking individual stocks. Today, there are thousands of ETFs to pick from. Over 8,550, to be specific.
With that said, here are five trends that can help you uncover the best businesses to invest in.
Five Trends to Help Uncover the Best Businesses to Invest in
No. 5 Energy Independence
I’ve written about America’s race for energy independence before. Essentially, the U.S. needs to reduce its energy dependency on foreign nations. This has become especially clear in the wake of the Russia/Ukraine conflict. Right now, the world still runs on oil. However, things will probably look very different in five to ten years. The U.S. is investing heavily in EVs and other alternative energy sources. This creates a number of trends:
- Electric vehicles: Charging stations, battery companies and vehicle manufacturers.
- Alternative energy: renewable energy, hydrogen-powered vehicles, etc.
- Raw materials: New energy sources will rely on new raw materials like lithium, cobalt, nickel, etc.
There are hundreds of companies that are leading the way in this space. This trend also shows no sign of slowing down anytime soon. This is mainly because energy independence is a rare bipartisan issue.
Democrats support energy independence because it means eco-friendly alternative energy. Republicans support it because it means putting America first. And investors support it because it means a lucrative ROI. Companies that operate in this space will probably get funding regardless of who sits in the White House.
This leads us to one of the next best businesses to invest in. Although, this one is a little more nuanced.
No. 4 Deglobalization
Larry Fink is the CEO of Blackrock, one of the largest investment firms in the world. 5 years ago, he stated that events like Brexit and trade wars were causing the decline of globalization. After the Russia/Ukraine conflict, he believes that globalization is gone for good.
Globalization is the process in which companies start to operate on a global scale. For example, major companies like Apple rely on factories, labor and materials from all around the world. It might design its products in California, manufacture them in China, and use metals from Africa.
For many years, globalization was a good thing. It basically allowed companies to offer high-quality products at a cheaper price. Now, COVID-19 and the Russia/Ukraine conflict are highlighting the faults of globalization.
When everything is running smoothly, it makes a lot of sense for a company to outsource its operations. But, once things stop running smoothly, outsourcing can quickly become a nightmare. COVID-19 made this very evident. In the span of a few weeks, factories and shipping facilities all over the world were shut down. Different countries also had very different rules/regulations on handling the virus.
For example, things might have been wide open in U.S. cities where Apple sells iPhones. But, the problem is that iPhones can’t get there because the virus is surging in China and factories are closed. With a global, interconnected supply chain this presents a huge issue.
(NOTE: I’m just using Apple as an example. Apple actually did a great job navigating the pandemic).
It’s easy to point out that COVID-19 was a rare black swan event. However, companies will now need to be prepared for future black swan events.
A more recent event that’s contributing to the decline of globalization is the Russia/Ukraine war. This conflict is still ongoing.
This war has already caused a surge in the price of commodities and energy. According to the International Monetary Fund (IMF), it will have ripple effects throughout the global economy. In fact, the IMF has already slashed its global economic growth forecast in half due to this war.
Prices are likely going to keep rising across the board. So, what does this have to do with the best businesses to invest in?
How Can You Invest?
As I said, this trend is not as black and white as others on this list. However, if we are entering a period of deglobalization then it’s a good idea to invest in companies that manufacture in the U.S. This will insulate them from relying on foreign countries.
You could also explore investing in companies that offer supply chain management. This will likely be a huge corporate focus over the coming years.
No. 3 Travel
The pandemic has also impacted the way that the world travels. First, it has stifled recreational travel over the past two years. This is true for domestic travel, but especially true for international travel. Since nobody has been able to travel, the world could experience pent-up demand that lasts for years.
Essentially, the pandemic robbed people of at least two summer vacations. Moving forward, people will probably be more likely to take bigger trips more frequently. Five years ago, it wasn’t a big deal to skip that weekend trip. You can always make the next one! Now, in today’s world, missing that weekend trip could literally mean waiting for two years before you’re allowed to travel again.
You can invest in this trend in the following ways:
- Hotels: Marriott, Hilton, Wyndham
- Travel booking sites: com, Expedia
- Airlines: Southwest, Spirit, American
- Car rentals: Avis, Hertz
Of course, a resurgence in COVID-19 could have the opposite effect on any of these stocks. This is why it’s important to stay up-to-date on the most recent news updates.
The pandemic also might be creating another long-term trend. This is the trend of remote work. If most of the workforce is allowed to work remotely moving forward then there is less need to live in a major metropolis. More people could move to cheaper areas. They could also adopt lives of semi-permanent travel. All of this is good for a company like Airbnb.
For what it’s worth, I consider Airbnb one of the best businesses to invest in period. It’s one of the only lodging companies that has an incredibly elastic supply of rooms. This is a huge competitive advantage for both the short-term and long-term.
No. 2 Advertising
One of the best businesses to invest in is the one that helps other companies sell products. AKA, invest in advertising companies. For the past two decades, Google and Facebook dominated the digital advertising space. But, Facebook just reported slowing user growth for the first time ever. It’s also making a massive shift towards the metaverse. This could be an early sign of change in the world of advertising.
It’s hard to say for sure where the advertising industry will pivot to. It could go towards new social media platforms like Snapchat, TikTok, Reddit, Discord, etc. Or, it could be to video-streaming platforms like Netflix, Roku or any of the Pluses (Disney+, Apple TV+, Paramount+). It could even end up going to some type of metaverse.
Either way, one thing is certain. Businesses will always spend money advertising to consumers. Whichever platform helps them do this successfully will undoubtedly make lots of money. This brings us to one of the top businesses to invest in for 2022.
Best Businesses to Invest in No. 1 Non-Fungible Tokens (NFTs)
Jeff Bezos famously decided to build Amazon when he saw that internet usage grew 2,300% in one year. He had never seen anything grow that quickly year-over-year. This spawned the idea of a digital bookstore and the rest is history.
Granted, it’s still possible that this explosive growth is mainly a bubble. The world’s richest 1% got wealthier during the pandemic. Perhaps there was just too much money chasing too few assets. What else could explain people spending millions to buy an image of an Ape?
With that in mind, NFTs also have a lot of untapped utility. Right now, people mainly buy them as investments. However, there are tons of applications for a unique, one-of-one digital token. In five years, there’s a chance that NFTs are attached to everything from event tickets to birth certificates.
This trend is still incredibly new. For this reason, it’s difficult to try and predict what it might turn into down the road. Luckily there are already a handful of NFT stocks that could benefit.
For example, Coinbase, GameStop and Draft Kings are all developing NFT marketplaces. Or, companies like Disney and Playboy have decades of intellectual property that could be monetized via NFTs. Newer companies like Yuga Labs are even creating NFT monopolies. Don’t forget, it’s entirely possible that the next best businesses to invest in haven’t even been started yet.
I hope that you’ve found this article on the best businesses to invest in for 2022 to be valuable! As usual, please base all investment decisions on your own due diligence.