Time for a list of compelling stock ideas for this year courtesy of our all-star roster of money managers, analysts and investment newsletter writers.
From real estate expert Dennis Mitchell to highly successful contrarian Benj Gallander.
From large caps to small, dividend payers to growth companies, we’ve assembled an eclectic array of top stock picks for you to consider to freshen up your portfolio.
Dennis Mitchell, CEO & CIO, Starlight Capital:
Prologis Inc. (NYSE:PLD), Market Cap: US$120.3 Billion, Dividend Yield: 1.55%, One Year Return: +70%
Contrary to how most investors are positioned, we feel strongly that 2022 will see slowing global growth due to:
- Central bank tightening
- Rising wages
- Commodity price inflation
- Supply bottlenecks
- No Build Back Better plan
- Mean reversion
- Elevated inflation but flat long bond yields (upside to 2.25% by year end).
Accordingly, we think real assets will outperform global equities just as they did in 2014, the last time the FOMC tapered.
We like Prologis Inc. (NYSE:PLD) as industrial real estate will continue to benefit from the rise of e-commerce and continued consumer spending.
Prologis is the largest industrial REIT in the world but still has significant opportunities to grow.
The company pays a 1.5% dividend yield but the dividend has grown at an 8.5% compound annual growth rate (CAGR) over the last five years.
In addition, 14% of Prologis’ leases expire in 2022 at rents that are approximately 25% below market rates.
Prologis trades at an implied capitalization rate* of 2.8% while their development pipeline should deliver $3 billion of new warehouses at a 6% yield.
Prologis also has the potential to acquire significant portfolios as they did in 2020 when they acquired both Liberty Property Trust for $13 billion and Industrial Property Trust for $4 billon.
With a dividend yield of 1.5% (growing at 8.5%), 6% funds from operations (FFO) growth from developments and 3.5% FFO growth from lease renewals, added to their Same Property Net Operating Income (S-P NOI) growth of 3%+ it is easy to see how Prologis could grow FFO/share by 10%+ in a year when S&P 500 earnings growth will be 8% or less.
*Cap rate is the ratio between the annual rental income produced by a real estate asset to its current market value.
Jesse Gamble, Senior VP & Portfolio Manager, Donville Kent Asset Management
Our highest conviction pick for 2022 is VitalHub (TSX:VHI), Market Cap: CDN$120.8 Million, One Year Return: +15%
- The healthcare sector, especially hospitals, are well behind the curve when it comes to implementing efficient and practical software.
- VitalHub’s patient flow software is improving hospital operational efficiency and demand for the their product is understandably strong.
Financially, the stock hits all of our main targets with:
- +20% organic growth.
- +80% recurring revenue.
- +80% gross margins.
- Strong and improving profit margins.
- Cheap valuation.
They are sitting on a large amount of cash with no debt and we expect another large acquisition to be the catalyst for the stock in 2022.
John O’Connell, Chairman & CEO, Davis Rea Investment Counsel
Citigroup Inc. (NYSE:C), Market Cap: US$126.24 Billion, Dividend Yield: 3.21%, One Year Return: +5.8%
In Citi you’re buying a bank with a 3.2% yield. That’s among the highest-yielding of the big bank stocks. High yields are often a signal the market doubts the company’s future.
Citi has been the bank most likely to find trouble. But you’re buying the assets (the banks loans to customers) at 75% of their tangible book value.
That’s a pretty big margin of error. It’s not that screwed up.
Early signs are new leadership is shaking things up. Get paid while you wait.
Josef Schachter, President, Schachter Energy Services Inc.
Touchstone Explorations (TSX:TXP), Market Cap: CDN$323 Million, One Year Return: -34.5%, Current Price: ~$1.52, One-Year target $3.00
- Touchstone has made three exploration discoveries in Trinidad where they operate.
- Production should rise to over 10,000 boe/d by Q4/22 when the two Cascadura natural gas wells come on-stream.
- Fourth quarter annualized cash flow should be more than C$0.55 per share.
- In 2022 they should drill up to eight wells (six development and two exploration – spending over US$50 million).
- The exploration wells are high impact potentials. Their 2021 oil discovery at Royston should see a four-well pad bring on production in Q1/23 adding 2,000 b/d of light oil.
- The stock is cheap at current levels but would be a very attractive BUY below $1.40 per share.
Horst Hueniken, President & CIO, Hueniken Asset Management
SeaSpine Holdings Corp. (NASDAQ:SPNE), Market Cap: US$510.2 Million, One Year Return: -15%
SeaSpine Holdings is a California-based medical devices company. It designs, develops, and commercializes advanced technologies used by surgeons to treat spinal and cranial disorders.
What’s more, it is at a growth inflection point, driven by an updated line of orthobiologics and spinal hardware, and by a surgical navigation system that is safer, faster, and cheaper than competitive offerings.
At the same time, SeaSpine offers the potential of a compound annual rate of return of at least 40 percent over the next two to three years.
This upside scenario would result from accelerating market share gains, which, in turn, are likely to trigger the current valuation gap to narrow.
Benj Gallander, President, Contra The Heard Investment Letter
McCoy Global (TSX:MCB), Market Cap: CDN$18.63 Million, One Year Return: +29%
McCoy Global has rebounded with oil and gas prices. After revenues dropped 35% early in the pandemic, they jumped 62% in the most recent quarter year-over-year.
The kicker is that the management is looking at “strategic alternatives”, meaning that a sale at a price premium is a reasonable possibility.
Matthew Aspro, Analyst, Davis Rea Investment Counsel
Alphabet Inc. Class A (NASDAQ:GOOGL), Market Cap: US$1.92 Trillion, One Year Return: +67%
In a year where animal spirits continued to stretch valuations to unimaginable levels, Alphabet’s forward price multiples not only lagged their index, but also contracted on a one-year basis.
The stock price hasn’t kept pace with the doubling of 2020 net income. Their current valuation and growth potential create an attractive opportunity to purchase the stock.
Firstly, Google’s monopoly of the search industry and further adoption of digital advertising bolster Alphabet’s long-term growth thesis.
Secondly, all consumer metrics point to the success of YouTube’s commercialization.
The YouTube Partner Program has already amassed two million creators, using a revenue sharing model to incentivize creators to produce high quality content.
Lastly, Google Cloud is positioned to remain Alphabet’s growth driver as it benefits from their competitive advantage and secular adoption of cloud computing.
From a macro perspective, Fed tightening coupled with liquidity leaving the system will create a drag on valuations, causing a rotation into fairly valued companies with stable cash-flow and growth potential.
Bruce Campbell, Founder & Portfolio manager, StoneCastle Investment Management
Salona Global Medical Devices (TSXV:SGMD), Market Cap: CDN$30 Million, One Year Return: -19%
We like the growth by acquisition and organic growth strategy in a highly fragmented industry.
The company has a strong management team with past success executing a similar strategy.