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:
ARC Resources Ltd.
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( “buy”) with a $21 target. Average: $18.13. Mr. MacCulloch: “Over the past three quarters, ARX has been diligently working on the integration of assets following the strategic combination with Seven Generations earlier this year. The deal provided ARX with increased scale and expanded capital allocation flexibility—both of which have significantly boosted its cash flow profile while providing additional diversification across the hydrocarbon value chain. The company’s production profile is roughly 60-per-cent natural gas and 40-per-cent liquids, which provides exposure to both commodities. In our view, the stock is heavily discounted and the valuation does not reflect the fundamentals of a company that is highlighted by a strong cash flow profile, low debt metrics and a commitment to returning 50–80% of FCF to shareholders.”