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5 best-performing S&P 500 stocks in the first half of 2022

Posted: 1 July 2022 11:05 am
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These stocks have outperformed in what's been a seriously down US market; will they keep going? Plus, 3 other notable sectors that have been outpacing the broader market.

The S&P 500 is on track to close out the worst start to a year since 1962, according to CNBC, but there's some light shining in the darkness.

While energy is the only sector in the green through the first half of 2022, there are plenty of individual stocks going up as the broader market goes down. If you're looking to shift some money away from riskier plays, they may be worth a look.

These are the best-performing S&P 500 stocks of the first half of 2022 as of June 30, according to Finviz data, and what's expected for them in the latter half of the year. Plus, three leading sectors beyond energy and their top performers.

1. Occidental Petroleum (OXY)

A Warren Buffett darling for 2022, Occidental Petroleum leads the best-performing S&P 500 stocks by a longshot. Up 104% year to date, the excellent performance has been driven by higher oil prices, a solid first-quarter earnings report and, almost certainly, news that Buffett keeps increasing his stake in the Texas-based oil company.

Even with Occidental's big runup in the first half of 2022, its shares are currently trading around 31% below what analysts on average expect it to reach.

For the full year, Wall Street expects Occidental to post US$37 billion in revenue, up 42% from the US$26 billion reported in 2021. Importantly, the company is using its windfall from high commodity prices to repay debt and increase shareholder value. As another boost for investor confidence, Buffett spent about US$529 million to scoop up another 9.6 million shares just two weeks ago when the stock pulled back in price, suggesting he sees value in the stock at its current price level and agrees with how the company is operating.

2. Hess (HES)

Hess is another oil stock that's been outperforming the broader market so far this year. Even though its run-up has slowed, the stock is still up an impressive 48% year to date, and analysts think it's still got significant room for growth.

The company announced in the first quarter new discoveries on the Stabroek Block offshore the South American country of Guyana and commenced production of its Liza Phase 2 development on the Stabroek Block. The company now estimates the block's total output to stand at around 11 billion barrels of oil equivalent (BOE). Its Liza Phase 2 operation alone is expected to add US$1 billion of net operating cash flow annually at a US$65 Brent oil price.

Hess executives pointed out during the company's earnings call in April that its portfolio breakeven is forecast to decrease to a Brent oil price of approximately US$45 per barrel by 2026, meaning crude oil prices above US$45 will be pure profit.

Analysts on average estimate Hess will report revenues of US$11 billion in 2022, up 45% from the US$7.6 billion posted in 2021. They see the stock hitting US$140.24 on average over the next 12 months, which represents a 30% upside from its current price.

3. Coterra Energy (CTRA)

Texas-based oil exploration company Coterra Energy made some big strides in the first half of 2022, with its shares rising 45% since the turn of the year. The company, which operates in the Permian Basin, the Marcellus Shale and the Anadarko Basin, averaged 83.1 thousand barrels of oil per day (MBopd) in Q1 of 2022, exceeding the high-end of its guidance.

Considering the current environment, Coterra revised its free cash flow projection for 2022 to approximately US$4.5 billion, up from around US$3 billion. The outlook for oil and gas exploration and production companies is mostly favorable for the foreseeable future, seeing that oil prices aren't expected to come down any time soon, which means a company like Coterra can be expected to continue to generate significant free cash flow.

The stock has a US$38.54 price target, which would spell a 47% upside from its current price if it's reached.

4. Valero Energy (VLRO)

Valero Energy is the largest global independent petroleum refiner and sits among the top S&P 500 performers so far this year with its 45% gain in share price. Its stellar first-quarter financials reported in late April drove shares of Valero to new all-time highs, though the stock has since retreated some as the energy sector cools off.

Valero blew past Wall Street's first-quarter earnings and revenue estimates, posting US$2.31 in earnings per share on US$38.5 billion in revenue, compared to the US$1.61 in earnings on US$32.2 billion in revenue expected.

Overall refining capacity is down and demand remains strong, which benefits Valero. Analysts are looking for revenue to top US$171 billion in 2022, up 50% from the US$114 billion reported in 2021. Shareholder earnings are also expected to increase significantly, climbing to US$16.57 per share, compared to last year's earnings of US$2.27.

5. Exxon Mobil (XOM)

Exxon Mobil has been another investor favorite so far this year, returning 44% over the past six months. The oil and gas company has been generating cash hand over fist with oil prices soaring, adding US$4.3 billion to its cash pile in the first quarter compared to the fourth quarter of 2021. Free cash flow in the quarter was approximately US$11 billion, up 57% from US$7 billion in the same quarter last year.

Excluding items, Exxon reported adjusted earnings of US$8.8 billion, or US$2.07 per share for the first quarter, up from US$2.8 billion, or US$0.65 per share, in last year's same quarter. With oil prices expected to stay elevated, this bodes well for Exxon.

Wall Street expects Exxon to post 2022 revenues of US$449.5 billion, up 57% from the US$285.6 billion reported last year. Earnings for the year are expected to increase 93% to US$10.39 per share, up from US$5.39 per share in 2021.

3 other notable sectors so far in 2022

While oil stocks fill the list of the S&P 500's five best-performing stocks in the first half of 2022, rising commodity prices and soaring inflation have lifted several stocks in other defensive sectors. They are sectors traditionally seen as refuges from recession and inflation.

Here are other leading sectors so far this year and a few outperformers in each.

1. Utilities

Income investors like utility stocks for their stability and strong dividends, and the sector typically ranks among the top picks for investors going on the defensive.

Here are some of the best-performing utility stocks so far this year, according to Finviz:

CompanyYear-to-date gainIndustry
Constellation Energy (CEG)+ 36.45%Utilities, Renewable
Sempra (SRE)+ 13.63%Utilities, Diversified
Consolidated Edison (ED)+ 11.02%Utilities, Regulated electric

2. Consumer staples

Soaring inflation has benefitted several stocks in the consumer staples sector, which includes things like food and beverages, household goods and hygiene products and alcohol and tobacco. Many boast stable operations and steady dividends, making them a solid choice during times of rising costs.

Here are three top performers in the consumer staples sector:

CompanyYear-to-date gainIndustry
Molson Coors Beverage (TAP)+ 19.44%Beverages, Brewers
Archer-Daniels-Midland (ADM)+ 14.28%Farm products
Lamb Weston (LW)+ 13.65%Packaged foods

3. Health care

Demand for healthcare is relatively immune to inflationary pressures, which makes the sector a top pick for many investors looking for some respite during these uncertain times.

Here are the three top performers in the health care sector so far in 2022:

CompanyYear-to-date gainIndustry
McKesson (MCK)+ 31.98%Medical distribution
Vertex Pharmaceuticals (VRTX)+ 27.66%Biotechnology
Bristol-Myers Squibb (BMY)+ 25.55%Drug manufacturers

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At the time of publication, Matt Miczulski owned shares of OXY and XOM.

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