One of the many “perks” of being Editorial Director here at Money Morning: Unfettered, 24/7 access to some of the sharpest, most successful investors in American finance, like my friend and colleague, Tim Melvin.

Tim, a 30-year market veteran, runs the Banking on Profits newsletter, and he happens to be one of the nation’s top experts on bank stocks. So, he was the first person I thought of when I considered the most lucrative investing trends of 2022.

Let me explain…

See, 2022 will be a “double-I” year – where investors will have to contend with inflation and interest rates. I believe those two terms will achieve mantra-level status in the year ahead.

Inflation is running hotter than it’s been in 30 years, and the Federal Reserve is taking action. Indeed, the central bank has dropped references to “transitory” inflation and acknowledged that the annual rate has been running at more than double its target rate for months.

Now the Fed is saying it will end pandemic-spawned bond purchases come March, and it’s also planning to move on interest rates.

America’s central bankers are now telling folks that they’re planning three quarter-point rate increases in the new year – kicking off a cycle that would take the benchmark overnight rate from near-zero now to 0.90% at the end of 2022, to 1.6% in 2023 and then to 2.1% in 2024.

Three years is a long time horizon in a globalized economy that – despite massive advances in predictive technologies and real-time communications – continues to deliver “stump-the-experts” surprises.

To be clear, this is absolutely nothing to fear. In fact, it’s worth looking forward to – a market environment like I’m expecting in 2022 will coax extreme performance from the investments Tim specializes in.

I’ll share two of the stock ideas that emerged from my talks with Tim. Each one trades for well under $20, and together, they’ll put double-digit dividends in your pocket.

Two Must-Have Stocks for 2022

Bank stocks – the right ones – will make “spectacular” investments, according to Tim. Tim believes there’s “deep value” to be had in well-run community and regional banks under “normal” circumstances, but in an inflationary and rising rate environment such as the one we’ll find ourselves in in 2022, the opportunities get even richer.

What’s more, Tim and I both also like the “right” real-estate investment trusts (REITs) and business-development companies (BDCs).

With banks, Tim likes Northeast Community Bancorp Inc. (NASDAQ: NECB), a cash-rich, superbly run lender based in White Plains, N.Y., that’s heavily involved in the lucrative multifamily-residential-construction market. Simple “financial physics” means banks like Northeast that manage to grow their loan portfolio smartly as rates rise will enjoy turbocharged stock-price gains and, very likely, dividend hikes.

NECB trades at just above $11 and yields more than 2.1%, which, believe it or not, falls on the lower end of the regional bank stock dividend spectrum.

Tim expects you’ll own this stock far beyond 2022 or even 2023. His recommendation: “Buy NECB, put it away, and forget about it for five, six, or eight years. When you finally do get around to checking your statement, you’ll be blown away.”

I’ve got another high-profit prospect lined up.

One of my personal top picks for 2022 is one of the aforementioned BDCs – Golub Capital BDC Inc. (NASDAQ: GBDC), a Chicago-based firm I recommended to my Private Briefing subscribers back in October.

BDCs are a kind of closed-end fund that plays a crucial role in the world of corporate finance. Like venture capital (VC) funds, BDCs are able to funnel capital to the small and mid-sized firms that can’t get financing in more conventional ways – either by loaning money or taking so-called “equity” (ownership) stakes.

But VCs are typically private firms that get their financing from institutions or wealthy, accredited investors. BDCs, on the other hand, are publicly traded and dole out the cash they raise from the retail crowd.

Golub invests in software and healthcare ventures and is known as a terrific loan underwriter. Golub has benefitted from a great deal of insider buying. As my Private Briefing subscribers will tell you, that’s one of my favorite “Buy” signals – insiders sell for all kinds of reasons, but they only buy when shares are headed higher. GBDC shares were trading at $15 mid-week last week, which is certainly an attractive price for this stock, but it looks even better when you factor in the 8% dividend payout.

Pick up NECB and GBDC at market when trading opens today, and hold on to them for the long term.

— William Patalon III

Source: Money Morning