We strongly believe in the benefits of owning a diversified portfolio of stocks. However, we all have our favorite stocks.
We asked some of our Fool.com contributors to narrow their favorites down to their top buying choice in 2022 if they could only pick one. here’s why 3M (NYSE: MMM), Brookfield Asset Management (NYSE: BAM), and Brookfield Renewable Power (NYSE: BEP)(NYSE: BEPC) topped their lists as the only stock they would buy this year.
A diversified giant still on sale
Reuben Gregg Brewer (3M): Benjamin Graham, renowned value investor and mentor to Warren Buffet, explains that investors are associated with “Mr. Market”, a capricious man prone to fits of despair and jubilation. When he’s too excited, you should consider selling him; when he’s pessimistic, you should think about buying. At present, Mr. Market is very pessimistic about the diversified international industrial giant 3M. One way to look at this is that the company’s dividend yield, at around 3.3%, is near the high end of its historical range.
Graham had other tips when it came to stock picking. Specifically, he argued that most investors would do well to stick with large, financially strong companies with strong dividend histories. 3M ranks well on these measures. It has a market cap of $ 100 billion, making it a mega-cap stock. Its balance sheet is rated investment grade by the major credit agencies, so it is financially sound. And he’s been increasing his dividend every year for over 60 years, making him a very elite Dividend King.
So why is Mr. Market pessimistic? The answer is a mixture of slower growth and product and environmental lawsuits. These are notable problems, but they are not insurmountable. Commercially, the industrial giant’s operations grow and shrink over time like any other business. Given its history and its focus on innovation, it should eventually get back on a better track. As for lawsuits, they could be costly, but it’s likely 3M will be able to handle the blow. In the end, it’s an attractively priced name with a great history that deals with issues that seem transitory.
A proven value creator
Matt DiLallo (Brookfield Asset Management): I like to invest. For this reason, I regularly buy a variety of stocks. However, if I could only buy one in the next year, Brookfield Asset Management would be my first choice.
To begin with, I like the management of the business. One of my favorites is CEO Bruce Flatt. He’s right up there with Warren buffett in my book as one of the best value investors about. I enjoy reading his quarterly letter to shareholders, which Flatt fills with investment and economic outlook. He is also a proven value creator. Since becoming CEO in 2002, he has helped Brookfield generate a total annualized return of 15.7%, pulverizing the S&P 500the total return of 10.6% during this period.
I also like the business model of the company. Brookfield is a leading global alternative asset manager focused on real estate, Infrastructure, and renewable energy – three of my favorite investment themes. An investment in Brookfield provides broad exposure to these three asset classes and more. Brookfield invests directly in these themes and manages private equity funds focused on these sectors.
Finally, Brookfield has huge upside potential. It plans to double its remunerated assets under management over the next five years. Combine that with the income based on the performance of its funds and the compound value of its investments on the balance sheet, and it has the potential to generate up to 25% total annualized returns over the next five years. This advantage, along with all the other positives, is why I would buy Brookfield if it was the only title I could buy this year.
Investors overlook the growth potential here
Neha Chamaria (Brookfield Renewable Power): 2021 is turning out to be a banner year for adding renewable electricity to the world, but it might just be the beginning. Still, stocks in one of the largest and fastest growing pure renewable energy companies have languished this year, which is why Brookfield Renewable would be at the top of my list of stocks to buy in 2022.
Brookfield Renewable, in fact, generated record funds from operations (FFOs) in its third quarter and believes it could increase its FFOs by almost 20% per year through 2026 through a combination of organic and inorganic growth. 2021 was also a solid year in terms of growth initiatives, with Brookfield Renewable nearly fivefolding its distributed generation business in the United States, signing agreements to acquire several late stage solar development projects in the United States and even making significant progress in the high potential green hydrogen space.
Brookfield Renewable’s current development pipeline is larger than ever, and the company is committed to increasing its dividends annually from 5% to 9%. This shouldn’t be difficult given the solid growth rate of its FFO. This dividend growth, 3.4% dividend yield, and the tremendous growth potential of renewables are the main reasons I see Brookfield Renewable as one of the best stocks for 2022.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.