These are the top-performing stocks of 2021 and our 2022 sector predictions

Time to make some 2022 predictions, disappear for a year — and see everyone again in 2023. Before that, let’s take a look at the top performers of last year.

A mix bag of industries

According to MW, the top three performing stocks of 2021 were:

• Devon Energy (NYSE:DVN — 196% return) — oil and gas (O&G) company
• Marathon Oil (NYSE:MRO — 150%) — an O&G company
• Moderna (NASDAQ:MRNA — 143%) — a biotech company

What a year to be bullish on oil! O&G companies made up 6 of the top 20 performers in the S&P 500, riding the trend of rising O&G prices while Moderna benefited from vaccine rollouts.

Also in the top 10 were companies from various industries including Fortinet (cybersecurity), Signature Bank (financials), Ford (automotive), Bath & Body Works (retail), and Nvidia (semiconductor).

2022 theme: Value investments

The top three performing sectors in 2021 were: energy, real estate and information technology.

It’s difficult — but not impossible — for sectors to remain in the top 3 for several years — with info tech and consumer discretionary (non-essential goods) being exceptions.

Now the fun part. For 2022, value is the name of the game — with our top 3 sector predictions being:

• Consumer Discretionary — US consumer spending to remain strong with more travel demand expected.
• Communications — Relatively low valuations of companies flushed with cash and ready to buy back their stock.
• Financials — Rising interest rates (expected in 2022) to benefit the sector.

Financials have been the obvious trade — with most of the Fed expecting three rate increases in 2022.

Investors: Top-down strategy

One method to investing is using a top-down approach — determining which sectors will drive returns — then look for companies within that sector. Investors can also use a basket approach with ETFs (ELI5):

• Communications ETF — Communication Services Select Sector SPDR Fund (NYSE:XLC).
• Consumer Discretionary ETF — Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY).
• Financials ETF — Financial Select Sector SPDR Fund (NYSE:XLF).

Instead of leaving it here with our predictions, over the next couple of weeks, we’ll take a deeper look at each of these sectors to explain why we’re bullish on them for the year.

See JOTD below for a look into the communications sector.