2 Monster Growth Stocks Set to Beat the Market (Again) in 2022

It has been a strong 2021 for the broad S&P 500 stock market index with a return of 22% so far. But there's some uncertainty creeping in; we're entering a brand new year focused on COVID-19 once again, and the Federal Reserve has hinted at sooner-than-expected interest rate increases thanks to high inflation. 

While this presents elevated levels of risk, investors could do well to pick individual stocks that suffer minimal impact from such issues. Given 2021 was relatively uncertain, examining this year's top performers might be a great place to start. 

Electric vehicle powerhouse Tesla (TSLA 12.06%) has crushed the S&P 500 this year, and so has software-tools developer Atlassian (TEAM -0.22%). Here's why they could do it again in 2022.

Image Source: Getty Images

1. The case for Tesla

It's a company popular with individual retail traders and large institutional investors alike. And with a 28,400% return since its public listing in 2010, why wouldn't it be? Its return of 50% so far in 2021 seems paltry by comparison, but it's still more than double what the S&P 500 delivered.

Tesla is now a $1.1 trillion company, and it arrived here through its widely respected leadership position in the electric vehicle industry. These new-age cars aren't just praised for their benefits to the environment, they're also raising the bar for comfort, performance, and autonomous technologies.

Few individual stocks have been as divisive as Tesla's, as detractors have questioned the company's ability to compete with large-scale automotive manufacturers -- and its valuation -- every step of the way. Yet there's no denying Tesla's incredible progress, particularly in becoming a profitable enterprise. 

Data source: Tesla. TTM = trailing 12 months. CAGR = compound annual growth rate.

While the stock trades at a lofty price-to-earnings multiple of 350 on a trailing basis, analysts expect the company to earn $8.17 per share in 2022, which would reduce the ratio significantly. 

But investors might be more focused on the hotly anticipated openings of brand new Tesla gigafactories in Texas and Berlin, Germany. The company has delivered over 627,000 vehicles so far in 2021, and these two facilities will be key to ramping up production significantly in the years to come. 

It's safe to say 2022 could be Tesla's most exciting year yet. 

Image source: Getty Images.

2. The case for Atlassian

Atlassian doesn't sell a red-hot consumer product like Tesla, so it typically gets less attention. Yet it's a $90 billion company, having come a long way since its founding in Australia. 

If its "TEAM" stock ticker didn't give it away, Atlassian is focused on software tools that make collaboration within organizations easier. Given all the discussion about work-from-home and hybrid arrangements, it's little surprise its stock has crushed the S&P 500 this year with a 54% return. If COVID-19 concerns truly do persist into 2022, then this one could be a no-brainer for your portfolio.

For example, Atlassian's collaborative Jira tool is used by software developers to plan, track, and release projects more efficiently. It allows teams to create custom workflows and tailored metrics to suit almost any project type, in addition to the ability to automate tasks to save time. 

Data source: Atlassian, Yahoo! Finance. CAGR = compound annual growth rate.

Like many enterprise software companies, Atlassian has shifted its focus to the cloud to better serve its clients. In the recent fiscal second quarter, cloud revenue was $318 million, which represented 53% growth -- far outpacing the company's CAGR over the last few years. It suggests there's a bigger opportunity for Atlassian as more clients migrate to cloud-based products.

Atlassian serves 216,500 clients, 50,320 of which have come aboard in the last 12 months alone. That's 168% growth compared to the number of clients acquired in the previous 12-month period. The company is already profitable, but its gross margin of 84% suggests that as revenue continues to scale up, profitability could accelerate substantially. 

For investors, Atlassian might be a great pick for 2022 just like it was in 2021, but it could be an even better one over the long term.