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We’ve had a fantastic 2021 as the ASX sprung to life and delivered a 13.5% return to investors. However, volatility has only increased recently with all the different macroeconomic phenomena at play.
The outlook for equities markets in 2022 looks distinctly positive, notwithstanding the global upheaval caused by the surging wave of omicron COVID-19 infections. Double-digit earnings forecasts for Australia, the US, China, the eurozone and several Asian countries by strategists at JPMorgan are in line with 2022 outlooks issued by other leading investment banks. The consensus is that listed companies will benefit from COVID-19 normalisation in 2022.
Megatrends such as commodities and infrastructure are expected to keep going strong in the year. ESG is another theme that we believe is here to stay, and when building long-term portfolios, we are of the opinion that ESG investing theme considerations should be made right away. New age commodities such as lithium, uranium, graphite fit the ESG bill, and we expect them to continue to do well as adoption increases. The smart institutional investor money is also headed in the same direction, and in the long-term, these investments made today will deliver dividends!
Australia’s next profit season in February should see the benefits of low-interest rates, China’s strong demand for iron ore, and the release of pent-up demand as households draw down excess savings and borders reopen.
That being said, here are the top 10 stocks that we think will be stellar performers in 2022. These companies are vetted by our analysts and are optimally positioned to navigate a high inflationary environment and the eventual interest rate hikes that we will witness.
1. Flight Centre (ASX: FLT)
Current Share Price: $17.83
The Flight Centre Travel Group is one of the world’s largest travel retailers and corporate travel managers. FLT has company-owned leisure and corporate travel business in twenty-three countries. The Company has adopted a strict cost discipline and lengthy liquidity runway whilst investing significantly in initiatives and strategies that will underpin its future growth. We are also confident that onward the second half of FY22, FLT will return to profitability.
2. Firefinch (ASX: FFX)
Current Share Price: $0.82
Firefinch, the gold miner, is a Mali focussed operation. It has an 80% interest in the Morila Gold Mine, which has produced 7.5 million ounces of gold since 2000. Firefinch is ramping up production at the 4.5mtpa mill and mine from a current annual production profile of 40,000 ounces of gold per annum from tailing treatment towards a target of 70 to 90,000 ounces of gold per annum through the mining of small open pits, stocks and tailings from mid-2021. The Morila Gold Mine is now forecasted to be an ASX Top 20 gold producing mine in 2023.
3. Zip Co. (ASX: Z1P)
Current Share Price: $3.85
Being among the top 10 shorted stocks on the ASX, Zip shares have been constantly under pressure. However, operating in 13 countries, Zip’s land and expansion strategy is attractive to global merchants who want a one-stop solution for each market. FY2021 was a transformational year for Zip. The firm delivered on its strategic priorities and became an international payments business. Their entry into India gives Zip access to a market that is forecast to hit over US$300 billion in BNPL volumes. Operationally and financially, Zip hasn’t put a foot wrong, and it will only be a matter of time when the share price reacts favourably.
4. Seven Group Holdings (ASX: SVW)
Current Share Price: $21.50
Seven Group Holdings engages in heavy equipment sales and service, equipment hire, building products and construction materials, media, broadcasting, and energy assets businesses. Over 75% of the revenue that Seven Group generates comes from the WesTrac segments, one of the largest Caterpillar equipment dealers, and close to 19% is generated from Coates, Seven Group’s equipment hire and solutions provider. Newer investments such as Boral will begin to make its way into Seven Group’s financials from FY22. Seven Group is a conglomerate and the Company still continues to grow – by 6% in FY21 and with the 70% acquisition of Boral, we forecast revenues to be significantly boosted in onward FY22.
5. Endeavour Group (ASX: EDV)
Current Share Price: $6.61
Endeavour Group is the retail drinks business and used to be the most profitable business segment in the Woolworths Group. Woollies decided to restructure by combining Endeavour Group and their Hotel business into a single entity – ensuring that the growing Endeavour Group can continue to accelerate its own growth aspirations. They lead the market by a massive margin in their segments and as a result, Endeavour will enjoy monopolistic margins. This makes their earnings and cash flows extremely sustainable, predictable, and non-cyclical – all characteristics of a solid defensive business.
6. Revasum Inc. (ASX: RVS)
Current Share Price: $0.64
Revasum, Inc. is a United States-based company that manufactures chemical mechanical planarisation (CMP), grinding and substrate manufacturing equipment for use in the production of semiconductor devices. The Company provides equipment solutions to enable single-wafer Silicon carbide (SiC) substrate grinding and polishing. Revasum is the only Company with grind and polish systems engineered specifically for SiC Single-wafer processing, hence the Company is looking to accelerate its advantage over its competition to become a market leader in the SiC space.
7. Bannerman Resources (ASX: BMN)
Current Share Price: $0.30
Bannerman is the owner of the Etango Uranium Project in Namibia and is focussing on the Etango-8, the iteration where Bannerman is looking to produce 3.5 million pounds of uranium every year. The production is bolstered with low costs and since the mine is located very close to Rio Tinto’s uranium mine, it has access to excellent support infrastructure. With the Life of Mine estimated to be over 14 years, the total production of uranium has been estimated to be 51 million pounds. Bannerman is well equipped to take advantage of the expected positive results from the PFS, capitalise on the uranium shortage, and become one of the leading uranium producers on the ASX.
8. G8 Education (ASX: GEM)
Current Share Price: $1.11
G8 Education is the leading for-profit early education provider in Australia, with over 46,000 children attending their services in any given week and over 9,500 team members educating and caring for those children. This scale is broadly three times greater than G8’s nearest for-profit competitors. With a growing industry and dominant market share, G8 Education is a comfortable ASX share to own. And with dividends paid quarterly, it’s also a compelling company for those hunting for yield in a low-interest-rate environment.
9. BlackWall (ASX: BWF)
Current Share Price: $0.60
BlackWall Limited is a real estate company which generates management, performance and transaction fees from real estate investment structures – the largest of these is their ASX listed flexible property security, WOTSO Property. BlackWall has grown their area under management to 130,000 sqm following the acquisition of 3 new properties in the last 6 months. The firm aims to grow their assets under management and therefore their fee income which results in dividend growth for shareholders. Over the past 5 years, total shareholder return has averaged 18% p.a..
10. Costa Group Holdings (ASX: CGC)
Current Share Price: $3.01
Costa Group is Australia’s leading fruit and vegetable producer. The Company grows and packs berries, citrus, tomatoes, avocados, and other high-quality produce sold to a range of domestic supermarket chains and independent grocers. Since the last decade, Costa has been continuously undertaking strategic transformations focused on expanding its scale and vertical integration within its portfolio and reinvesting in the business to refresh its core assets and fund growth. Costa went through many years of challenges. First with unfavourable conditions due to extreme weather and then with the global pandemic which causes considerable operating headwinds. Nonetheless, CGC maintained good operating performance and a solid balance sheet.
We’re kicking off the new year with these above 10 stocks as our top picks for the months ahead. Over the next few weeks, we will be publishing research reports on them and continually monitor their performance and on-goings.
Much more to come from us this year. Happy New Year again, and stay tuned for our ‘Top Macroeconomic Trends to watch out for in 2022’ – which will be delivered to your inbox on Monday, 10th January.
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*all stock prices as of market close 6th January 2022.