2021 is almost over. Like many others investors, I’m analysing the best stocks to buy for next year. So far, these three shares are top of my watchlist.
One of the best to buy now?
Last month, I said: “I think the Boohoo (LSE: BOO) share price is potentially too cheap to ignore”. That’s still my opinion. This week’s profit warning doesn’t change the investment case for me. In fact, it seems even more compelling now given the shares over the last month or so have fallen by a quarter.
Christmas could be a boon for the company, especially if Omicron leads to more restrictions and encourages more consumers to buy online.
But with Boohoo already saying that returns are up due to shoppers sending their dress purchases back, Omicron could also dampen Boohoo sales. But I see that as a short-term issue.
Another problem is, investors seem to be turning away from fast fashion shares in general as ASOS shares have also been falling. Supply chain issues are key problems both are facing.
Boohoo shares strike me as cheap now, so combining that with its still-high (relatively speaking) level of growth, makes me think it’s a potentially profitable investment long term. It’s one of my best stocks to buy for 2022 and it won’t be long before I add it to my portfolio.
A smaller-cap income and growth option
finnCap (LSE: FCAP) could be a great small-cap growth stock, combining capital growth with income, which I think is a very powerful combination.
The group focuses on providing financial services to quite a number of listed companies, but also privately-held growth companies.
The financial services group has solid fundamentals. For example, it has a strong operating margin, which has jumped to 18.7% from 4.6%. That’s lower than earlier in the pandemic but the margin now is also higher than in 2019. Return on equity has also improved a lot in the last three years, to 29%. It was 16.4% in 2019.
The problem is, if 2022 sees a slowdown in IPOs and other fundraising activity, demand for finnCap’s services could melt away, which would hit its revenue and profits. This makes me a bit nervous.
On the plus side though, it’s a higher-yielding share. The dividend yield is around 4.8%. This income, along with it being a smaller-cap stock with growth potential and solid fundamentals, means I’m interested in buying the shares for my portfolio.
A riskier investment
Totally (LSE: TLY) is a smaller-cap penny stock that I think is also potentially one of the best stocks to buy now ahead of 2022.
The healthcare services provider should benefit from the NHS backlog as it provides insourcing. This is a system whereby hospitals subcontract medical services and procedures to it, and it uses hospital premises and equipment for delivering treatments.
In the short term, if Omicron leads to more hospital admissions this may put its general ops on hold. That could impact revenues. But longer term, I think there’s a big opportunity for the group.
An ageing population, ongoing pressures on hospitals (especially over waiting times) and increased spending on the NHS, all mean Totally has a number of factors in its favour to help boost growth.
I’m thinking it could be one of the best stocks to buy for my own portfolio, as I don’t hold any similar companies.
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Andy Ross owns no share mentioned. The Motley Fool UK has recommended ASOS and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.