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There’s a lot of uncertainty ahead in 2022. But there are also opportunities for informed investors – stocks with the potential to outperform the broad market, whatever it does. Last time, I looked at two pipeline stocks with potential. Here are two more to consider. The first is for conservative investors, the second for those who are prepared to accept more risk for a high potential return. Dollar amounts are in U.S. currency.
Everyone knows about Pfizer these days. It was the first company (along with German partner BioNTech) to have a Covid vaccine approved for general use. Their vaccine has proven to be highly effective with minimal side effects, and now Pfizer has developed an anti-viral oral drug to combat the coronavirus that recently received emergency approval from the U.S. and Canada.
The share price is finally starting to reflect the fact this is not just another staid old big pharma company. After bumping along below $40 for most of the past five years, the price began moving up sharply in November and touched an all-time high of $61.71 in December, before pulling back in the January market selloff. It’s trading at a reasonable p/e ratio of 12.38.
On Dec. 22, Pfizer announced it had received approval from the FDA for the emergency use of its anti-viral pill, Paxlovid, for Covid patients with mild to moderate symptoms. The decision was based on test results that showed an 89% reduction in the risk of Covid-19-related hospitalization or death from any cause in adults treated with the medication within three days of symptoms appearing. No deaths occurred in the treatment group compared with nine deaths in the placebo group by Day 28. Canada approved Paxlovid on Jan. 17.
Pfizer is increasing its quarterly cash dividend by 2.6% to $0.40, effective March 4. This will be the 333rd consecutive quarterly dividend paid by the company. The yield is down to 2.4%, even with the latest increase.
Pfizer is the hottest name in pharmaceuticals right now. Demand for its vaccines will continue to grow at least through 2022 and perhaps beyond, as it’s becoming increasingly apparent that annual Covid boosters will be needed, just as with the flu shot.
With the price down around $46, I think there’s another 30%-40% upside potential over the next year, with limited downside risk. Pfizer is my conservative pick for 2022.
The best formula for finding potential outperformers is to look for quality companies that have been badly beaten down by events beyond their control. Sabre qualifies, big time.
Sabre was introduced in my Internet Wealth Builder newsletter in December 2020. It is a software for services firm that powers the back end of many travel-related companies. These include airlines, airports, car rental companies, cruise lines, hotels, search engines, and online travel agencies. Sabre’s software is indispensable to its clients. It’s a huge market, with the industry generating over $8 trillion annually when things are normal – which, of course, they have not been for two years.
Located in Texas, the company has two main business groups. The hospitality group provides technology for over 40,000 hotels and resorts in 160 countries. The platform allows these clients to optimize revenue and improve the guest experience. All this is invisible to the public, but essential to making sure the travel experience runs smoothly. So when you phone or go online to book a hotel room, you are likely using the Sabre central reservation system. Beyond the reservation platform, the company provides software that manages inventory, guest profiles, staffing, and payment systems.
The second area is centered on the airlines and travel agencies. Sabre provides the technology for mobile devices and all other platforms people use in their daily lives. This provides clients with data rich solutions, which are essential to remain relevant in a competitive marketplace like travel. If you use companies like Bookings.com and Expedia, they’re both built on the Sabre platform.
Prior to the pandemic, the company’s stock was trading north of $27 but it got crushed when travel suddenly ground to a stop, trading as low as $8 in March 2020. It then rallied when it appeared the vaccines had the coronavirus in retreat, only to be flattened again with the onset of omicron. It was priced at $11.31 at the time of publication.
At some point, hopefully in 2022, the coronavirus will probably fade away, as happened with the Spanish flu a century ago. The invasion of Ukraine by Russia has thrown another monkey wrench into the travel industry and the impact on European travel is uncertain at the moment. Eventually, though, tourism will return, airports will be jammed, cruise ships will be full, and Sabre’s stock will soar once again.
I think you’re looking at upside of 100%+ here, but it will take time, patience, and a strong stomach. This one is for aggressive investors only.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on Twitter at https://twitter.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
Notes and Disclaimer
Content © 2022 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
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