It was a wild year in the market as investors juggled ongoing pandemic recovery, inflation, monetary policy, high valuations, and geopolitical issues. There were certainly big winners and losers. Some of the largest stocks moved the market last year, and they reveal important investment themes as we move into 2022.
Nvidia (NASDAQ: NVDA) is a semiconductor stock that grew into one of the biggest companies in the world this year. It’s up more than 110% year to date. The company has been a leader in the gaming graphics processing unit (GPU) market for years, but it is gaining traction in a wider variety of applications, such as data centers for cloud computing, artificial intelligence, and robotics.
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That appreciation was driven by excellent fundamentals, as Nvidia delivered excellent results despite ongoing supply chain issues. The company’s revenue is up 65% over the first nine months of its fiscal year, and operating income has climbed 130%. Its forward price-to-earnings (PE) ratio has also doubled to 60, so investors should recognize the implication of buying stocks at that valuation level. Nvidia announced new products for gaming and cloud, adding to its prospects. Massive tech investments by Meta Platforms (NASDAQ: FB) and other businesses will also be a major catalyst in the coming years.
Alphabet (NASDAQ: GOOGL) marched steadily higher throughout the year to a 60% stock return. The company delivered roughly 45% sales growth over the first nine months of the year, while operating profits increased 120%.
In a year where runaway valuations made headlines for tech stocks, Alphabet delivered stellar returns based primarily on fundamentals rather than inflated valuation ratios. Its trailing PE ratio, forward PE ratio, and enterprise-value-to-EBITDA are all lower than one year ago, though price-to-sales and price-to-book have risen slightly.
Alphabet is a major player in a few different growth markets, but its sales and profits still come overwhelmingly from its advertising business. That concentration adds risk to the story, but it’s still oddly cheap for a tech stock with that growth profile.
3. Wells Fargo
Wells Fargo (NYSE: WFC) rode momentum in the financial sector and bank stocks earlier this year, while good news in the second half of the year drove the stock more than 60% higher for the year.
Wells Fargo stock has lagged the Financial Select Sector SPDR (…….