RH

In addition to being a position in Warren Buffett's listed stock portfolio, RH can boast of being a 20-bagger stock since its IPO in 2012. In reality RH (from its former name Restoration Hardware) has had a long history since its birth in 1979. It was first listed in 1998 before going public in 2008. RH is an American high-end furniture company. The company has 94 furniture galleries and 36 factory outlets in the United States and Canada. The company has obviously benefited from lockdowns during the health crisis, but it would be simplistic to attribute only this success to it. It also succeeded in moving upmarket towards luxury to distinguish itself from Ikea, as well as its digitalization, which represents a rising channel of its activity. This luxury positioning also allows it to better resist market fluctuations, as it targets wealthy buyers who are less exposed to economic hazards. The company achieves margins of around 10% for its net margin and 20% for its operating margin (these margins should increase in 2022). RH generates regular and growing free cash flow. ROE and ROA are in good shape. The company is gradually reducing its debt and Capex represents 6% of its turnover. The stock has potential for 2022 to continue its strong momentum.

Evolution of RH's income statement since 2012:

Source: MarketScreener

Cognizant Technology Solutions:

Cognizant Technologies Solutions is one of the leading IT service providers in North America and a major specialist in IT outsourcing to India. It is one of the few technology and consulting companies that is vertically organized around two primary sectors: financial services and healthcare. The company is showing strong returns on capital, a policy set in motion with activist group Elliott taking a stake between 2016 and 2018. Return on equity is expected to be 18.6% in 2021. The margins achieved in the last few quarters are 15% for the operating margin and 11% for the net margin. The company is in remarkable financial health with more cash than debt and positive and slightly growing free cash flow. In recent years, the company has accelerated its acquisitions to boost the group's external growth with some success. This is evidenced by the flurry of transactions in recent months, including the $1.4 billion purchase of TQS Integration, a consulting firm with a strong reputation in the healthcare industry, whose clients include nine of the ten largest pharmaceutical majors. Analysts who follow the group have so far been very positive about this strategic reorientation. Sales growth should continue to increase by 8 to 11% per year for the next three years. Combined with a generous policy of shareholder remuneration via share buybacks and dividend payments, Cognizant seems to be riding on favorable winds for 2022.

Evolution of Cognizant Technologies Solutions' income statement since 2012 :

Source: MarketScreener

Alphabet:

Alphabet, the parent company of Google, is the world's largest advertising company. The company offers products and services that we all use every day (Chrome, Google Maps, Search, Google Play, Android, Youtube, Google Cloud, Google Ads, etc.). It is also in a monopolistic situation since Google Search crushes the competition with more than 90% of the market share in developed Western countries. The company is at the crossroads of several major technological trends (artificial intelligence, digitalization, Internet of Things, etc.). With a steady 20% annual growth in turnover, the outlook remains good for the years to come and Alphabet could still deliver the best of itself over the next few years. Earnings releases continue to surprise on the upside, Google's brand image is rising in the rankings, and Youtube is gradually competing with Spotify for music and Netflix for movies. Alphabet's gamble presents some perceived risks, especially related to antitrust and a possible dismantling. But I don't think this is a real risk for the shareholder, who will see his or her position increase if Alphabet splits into several companies (pure-players are better valued these days). A low-risk bet for 2022, whether the epidemic resurfaces or not.

Evolution of Alphabet's income statement since 2012 :

Source : MarketScreener

The author is a shareholder of Alphabet.