Stockmarket winners: experts share their top tips for 2022

Volatility is likely to increase, but shares should still deliver rising investment returns this year. Here’s what analysts are looking at.

Aussie share prices are tipped to continue climbing this year, although the risk of a sudden and painful fall is increasing for investors.

Higher inflation and interest rates, continuing Covid uncertainty, and government stimulus winding down are among the potential roadblocks, but stockmarket analysts say the recovery from the worst of the pandemic should outweigh those negatives.

Mining, energy and healthcare stocks are among their top picks to perform stronger than the overall market.

Saxo Capital Markets Australian market strategist Jessica Amir said stronger economic growth should help shares rise, but at a slower pace than in 2021.

She said interest rates were rising for the first time in a decade and this would help banks make bigger profits from mortgages, while Covid behavioural shifts towards online spending should benefit logistics stocks such as WiseTech Global.

Saxo Capital Markets Australian market strategist Jessica Amir is positive about 2022.

“Demographics who never used to shop online are now spending up from the comfort of their homes,” Ms Amir said.

More Covid mutations would put medical technology companies in the spotlight, and she expected Australian healthcare giant CSL to increases profits after its businesses were impacted by lockdowns.

BHP was Australia’s “sleeping beauty mining giant” and one of the most bought stocks at Saxo in recent months, Ms Amir said. Ampol should benefit from rising oil prices and inflation, she said.

Forager Funds Management senior analyst Gaston Amoros said his firm preferred “beaten-up small cap growth stocks” that had massively underperformed their larger peers, and it liked software companies Whispir and Bigtincan.

“They are both very scalable businesses, well-managed, that solve real problems for their customers through software and automation,” he said.

“We are long-term investors and our investment horizon is around three to five years.”

Mr Amoros said Australia’s stockmarket was up almost 40 per cent since December 2018, and the withdrawal of Covid stimulus would create strong headwinds for stocks.

“A return to the historical norm of 7-8 per cent (annual returns) would make sense – and that might be on the optimistic side,” he said.

Forager Funds Management senior analyst Gaston Amoros says stocks are facing headwinds.

Investment company Baker Young’s managed portfolio analyst, Toby Grimm, said the outlook for shares remained positive but warned there would be more volatility.

“The valuation of the market is still well above long-term averages, and we haven’t had a significant correction for quite some time,” he said.

“We might see a correction come through and give you a good buying opportunity.”

Mr Grimm said he expected Woolworths shares to outperform the market in 2022, following its December share price plunge that was sparked by a profit warning.

He said banks “should also be interesting” and his top pick in that sector was The Commonwealth Bank, while he also liked BHP as iron ore prices showed signs of recovering in 2022.

Marcus Today senior market analyst Chris Conway also backed BHP shares to do well, because commodity prices often rose disproportionately higher than overall inflation.

He said mining, energy and healthcare were his top picks for strong sectors in 2022.

CSL should be a strong performer as it was the “biggest and best at what it does”, Mr Conway said, adding that fellow healthcare stock Pro Medicus was also promising.

“Pro Medicus is a bit higher up the risk curve but a great Aussie healthcare and tech company that is revolutionising diagnostic imaging,” he said.

Mr Conway said his bullish outlook for shares was based on global economic growth continuing for at least a year or two and official interest rates remaining low.

“It could be a bumpy road sorting out the pace of rate hikes, but I see the Aussie market higher by the end of the year,” he said.

BHP shares are tipped to outperform the stockmarket in 2022. Picture: Rebecca Le May

TIPS FOR SHARE INVESTORS

• Have a plan and stick to it.

• Before buying, think about what’s happening around you and the key themes and opportunities.

• Don’t think too short term as rising inflation could create a bumpy ride.

• Make weekly deposits into an investment or trading account.

• View market downturns as your friend and an opportunity to buy at a discount.

• Diversify your investments and set some cash aside for future opportunities.

• Consider exchange traded funds where you can invest in an entire market with just one trade.

• Understand the impact of higher interest rates – such as causing some households to cut discretionary spending.

Source: Marcus Today, Saxo Capital Markets, Forager Funds Management

Originally published as Stockmarket winners: experts share their top tips for 2022