Going by the headlines, you’d think that 2022 was a pretty bad year for stocks. The TSX and the S&P 500 are both down for the year, bonds are doing poorly, and even real estate — once the oasis in the desert of market volatility — is falling in price. On the surface, it appears to have been a pretty bad year. But if you look a little deeper, you’ll see that it wasn’t that bad at all. Many individual stocks did quite well this year, including some stocks that are popular and widely owned.
In this article, I will explore three investments that have done their job protecting peoples’ wealth in 2022.
It’s not hard to see why. Oil companies have been paying off their debt all year long, giving them great positioning for the year ahead.
Take Cenovus Energy (TSX:CVE), for example. In the third quarter, it revealed that it had reduced net debt by $2.3 billion, or 30%. It reduced total long-term debt by 22%. This is important because it shows that the company didn’t simply sit on its laurels when oil prices were high; it took active steps to ensure that it would thrive in a future with lower oil prices. The factors that caused oil to rally in the first half of the year were clearly temporary in nature. The war in Ukraine and the post-COVID supply chain issues were never going to go on forever.
Today, prices are normalizing, but we have enough demand for oil to anticipate prices staying in the $70 to $80 range long term. And Cenovus has repaid enough debt to generate large profits and dividends at those prices.
Fertilizer stocks are another asset class that did pretty well this year. Fertilizer prices exploded much like oil prices did because of the war in Ukraine. Nutrien (TSX:NTR) stock rallied as a result. In its most recent quarter, NTR did $8.8 billion in revenue and $6.6 billion in net income.
In the first nine months of the year, it did $10 billion in adjusted EBITDA (“adjusted EBITDA,” or adjusted earnings before interest, taxes, depreciation, and amortization, is an unofficial profit metric that companies sometimes publish when they think normal accounting rules understate their performance). All of these figures were all time highs for the company. That’s really remarkable considering that the amount of fertilizer it sold in the third quarter declined, but it earned higher revenue due to high commodity prices.
Another asset that has performed well this year is term deposits. In Canada, these are commonly called “Guaranteed Investment Certificates” (GICs). They’re long-term, bond-like products that you can buy off your bank. Thanks to the Bank of Canada’s interest rate hikes, the yields on GICs have risen above 5%. They have delivered solid returns, despite having much lower risk than stocks. They haven’t done as well as energy or fertilizer stocks, but they have outperformed the TSX Index.
The post These 3 Wealth-Protecting Investments Have Done Their Job in 2022 appeared first on The Motley Fool Canada.
Before you consider Cenovus Energy, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Cenovus Energy wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks
* Returns as of 11/4/22
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Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.