I won't say I told you so: Some investors thought it would never get here, but the traditional "Santa Claus rally" made the last few trading sessions of 2021 exciting.
And that's about the extent of the reminiscing we'll do - today is all about looking forward... forward to the stocks that are best positioned to outperform the rest in 2022.
I've got three stocks on my radar right now that I think are going to be big winners in the year ahead.
Here are the tickers - and some bonus trades I think could double our money for very little risk.
Make These Three Stocks Your First Buys of the Year
I've been watching this stock for a while now, and I think Quidel Corp. (NASDAQ: QDEL) looks great for '22. That's largely because it's a leading maker of rapid tests, including for COVID-19, that are used at the point of care or sold for home use.
If you're like millions of other Americans right now, you're trying to get your hands on one right now.
Just last week, Quidel announced it had agreed to purchase testing company Ortho Clinical Diagnostics Holdings for $6 billion. Ortho's in-vitro diagnostics are used by hospitals, clinical labs, and blood banks.
Before Thursday's announcement, shares of QDEL had risen more than 34% since Dec. 13, 2021, as demand for rapid tests surged in the face of the omicron variant.
After Thursday's announcement, shares of QDEL plunged more than 15% when trading opened in New York - that's selling the news for you.
Based on omicron and the shortage of rapid tests, I was already watching QDEL. Thursday's pullback gave me the opportunity I was waiting for.
At this point, I like buying the QDEL March 18, 2022 $155 calls and QDEL March 18, 2022 $160 calls - a classic call spread, in fact - for $2 or less. Plan on exiting the spread for a 100% profit.
I like CarMax Inc. (NYSE: KMX), the Richmond, Va.-based used vehicle retailer. Used vehicles are an unusually hot commodity in America right now.
Just before Christmas, the company released quarterly results that beat estimates as robust demand and pricing for used cars offset higher costs.
For the quarter, revenue grew 65% to $8.5 billion, beating estimates of $7.378 billion. On the bottom line, earnings climbed 15% to $1.63, easily beating estimates of $1.45.
Unsurprisingly, given the state of the used car and truck market, we saw a huge increase in sales for the company. Retail used unit sales grew 16.9%, same-store unit sales grew by 15.8%, and wholesale units grew a whopping 48.5%
And yet CarMax stock dropped 6.66% as it reported earnings.
At issue was the thought that KMX hadn't been aggressive enough during the recent automobile shortage. The company only opened one dealership during the last quarter.
I'm not going to second-guess management here in this column. Instead, I'm simply going to focus on "when" I would like to establish a position in KMX.
Over the last four months, the company has bounced off support at $122 on two occasions. That's where I want to target the stock.
If shares of KMX trade down to $122 by Jan. 7, 2021, I like buying the KMX Feb. 18, 2022 $125 calls and the KMX Feb. 18, 2022 $130 call spread for $1.85 or less. Plan on exiting the spread for a 100% profit or if shares on KMX close below $117.
And finally, I'm watching Paychex Inc. (NASDAQ: PAYX). The human resources and payroll processing company easily beat second-quarter estimates and hiked guidance.
The U.S. economy added 210,000 jobs in November. That's a positive signal for HR and payroll stocks such as Paychex, but it was before the discovery of omicron, which threatens to derail the economic recovery from the pandemic.
Now, it's too early to know how much damage omicron could have on the economy and HR providers such as PAYX. But we do know that the pandemic accelerated the digital transformation of the HR space, which has undeniably been good for PAYX.
For the quarter, revenue grew 13% to $1.109 billion, above estimates of $1.062 billion. On the bottom line, earnings rose 25%, to $0.91 per share, well above estimates of a 9% increase to $0.80.
Prior to Wednesday's news, the stock formed a base since mid-October. Still, after announcing the Q2 results, the stock jumped.
That's a good sign, and it'd be good to wet your beak at today's levels, but I want to see shares pull back and fill that gap before committing serious capital.
If shares of PAYX trade back down to $130 by Jan. 7, 2021, I like buying the PAYX March 18, 2022 $130 call and PAYX March 18, 2022 $135 call spread for $2.45 or less. Plan on exiting the call spread for a 100% profit or if shares of PAYX close below $123.
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.