Desjardins 2022 Top Picks Desjardins Securities’ Equity Research team revealed its 2022 outlook and top stock picks in a research note released Monday before the bell.
Expressing caution as the Omicron variant continues to spread and bring volatility to global stock markets, the firm selected 30 equities possessing “the best growth prospects and/or the largest number of expected catalysts” for the next calendar year in 2022.
“While the end of 2021 has served to highlight the ongoing threat of COVID-19 with a surge in cases related to the Omicron variant, prompting new restrictions and the accelerated rollout of booster shots, the economy and markets have proven to be relatively buoyant,” the firm said. ”The TSX reached an all-time high in November, up ~25% on the year before retreating on the back of Omicron fears, with a year-to-date return of close to 19% as of mid-December, well above the long-term average of approximately 9 per cent.
“Following a massive recovery in commodity prices, energy led the way with a remarkable year in 2021 after a very tough 2020. Honourable mentions go to the financial and real estate sectors. While 2022 could be more muted in terms of performance given an expected rough start—with Omicron, capacity restrictions and ongoing labour and supply chain issues, less stimulus, expected interest rate hikes to combat inflation, and a tough comparison vs 2021 — we do expect that navigating toward a full recovery post-pandemic will provide another leg of growth.”
Here are Desjardins’ top investing ideas for 2022:
REITs
BSR Real Estate Investment Trust ( “buy”) with a US$21 target. Average: US$19.77.
Analyst Michael Markidis: “A pure-play U.S. multifamily business with significant concentration in Texas (90 per cent). Expanding new and re-leasing spreads should drive outsized organic growth in 2022.”
Dream Industrial Real Estate Investment Trust (“buy”) with a $19 target. Average: $19.22.
Mr. Markidis: “We believe underperformance vs industrial peers this year was due to an atypically high volume of equity issuance; this feverish pace will likely not be repeated next year. Performance in 2022 should also be boosted by continued operating momentum in Canada (more than 50 per cent of the portfolio).”
InterRent Real Estate Investment Trust (“buy”) with a $21 target. Average: $20.
Mr. Markidis: “Robust organic growth, combined with the contributions from recently acquired properties, provide unmatched earnings upside. Our forecast calls for a two-year FFOPU CAGR of 13 per cent through 2023. In our view, the current unit price does not fully reflect this; IIP is trading at a 5-per-cent discount to NAV.”