Most Tipped Stocks | Will the Stock Market Rebound in 2022

Most tipped stocks: Which companies are analysts favouring? Photo: Phongphan / Shutterstock.com

It has been a very tough year for stock markets. Widespread economic problems and the ongoing war in Ukraine has put many leading indices under pressure. The US has been particularly badly hit, with the S&P 500 (US500) having fallen 20% from 4,796.56 points in early January to 3,831.39 at its last close on 7 July 2022.

S&P 500 price chart

The UK’s FTSE 100 (UK100) has endured a very turbulent first six months of 2022 and as of 7 July was trading around 5% lower than at the start of the year. This turbulence has also wreaked havoc with predictions made by fund managers and analysts in January as many of their favoured stocks have struggled.

FTSE 100 price chart

Here we take a look at some of the most tipped stocks of the year and whether there’s likely to be a broad stock market recovery during the second half of 2022.

What is a tipped stock?

A tipped stock is one that an analyst believes is being underappreciated by investors. This means its share price doesn’t accurately reflect either its current position or future potential. For example, they could believe the stock market is failing to accurately grasp the potential of a company’s new management team or product launch. Alternatively, analysts may conclude that a company’s stock price is being adversely affected by external factors that have no bearing on the business itself.

Whatever  the reason, a tipped stock is expected to perform better than expected over a particular time horizon, which should be subsequently reflected in its share price. It’s not just the highest earning stocks that are considered by investors. A variety of factors, including the sector in which it operates, should be taken into consideration.

According to Victoria Scholar, head of investment at Interactive Investor, considering the most tipped stocks can help idea generation but shouldn’t be relied upon without additional research.

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“It might make you aware of an exciting investment trend such as electric vehicles, artificial intelligence or the metaverse,” she told Captial.com. “However, do not use stock tips in isolation as they may very well not work out for you.”

What are the most tipped stocks of 2022 so far?

At the start of 2022, analysts at Bloomberg Intelligence identified 50 stocks worth watching. These included accommodation platform Airbnb (ABNB), cigarette manufacturer British American Tobacco (BTI), food processing company Associated British Foods (ABF), car manufacturer General Motors (GM), streaming service and production company Netflix (NFLX), and pharmaceutical giant Pfizer (PFE).

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, also highlighted five companies that she believed could do well this year. These were mining company Anglo American (AALI), financial services company Lloyds Banking Group (LLOY), investment firm Polar Capital Holdings (POLR), medical equipment manufacturer Smith & Nephew (SNN), and food producer Tate & Lyle (TATE).

“Fortune favours the bold, and we think these five companies could be worthy of attention in the coming year,” she wrote at the time.

Elsewhere, retailer Pets at Home (PETS) was being tipped to benefit from the increased interest in animal ownership during the Covid-19 pandemic.

A challenging year

However, the first six months of the year have presented plenty of challenges to both management teams at the helm of companies and investors deciding where to put their money. In particular, rising inflation and interest rates have increased the cost of living. This includes huge hikes in the cost of oil which has made life increasingly difficult for drivers.

Ongoing global supply issues in the wake of the Covid-19 restrictions have also intensified as a result of the ongoing war in Ukraine following Russia’s invasion of the country back in February.

This was  acknowledged by Hargreaves Lansdown’s Lund-Yates in her quarterly update published at the end of March 2022:

“When we chose our five shares to watch for 2022, we couldn’t have predicted the uncertainty we’ve had so far this year,” she wrote. “Soaring inflation and the Ukraine crisis mean uncertainty isn’t going away anytime soon, and that means more ups and downs are likely.”

Are we heading for a global recession?

We haven’t seen a squeeze on living standards like this for some time, according to Keith Wade, chief economist and strategist at Schroders, who says:

“Real incomes are falling in a way they haven’t done since the second half of the 1970s, when inflation was very high, or the early eighties, when we had a really big oil shock.”

Wade believed “we’re effectively at the early stages of an economic slowdown” and predicted weaker consumer spending over the coming months.

“The probability of a global recession toward the end of this year or early next year is quite high – it’s probably in the order of 35%.”

Of course, anyone looking at the potential of a bear market recovery needs to know the key signs to look for, according to Hartford Funds:

“Market cycles are measured from peak to trough, so a stock index officially reaches bear territory when the closing price drops at least 20% from its most recent high… A new bull market begins when the closing price gains 20% from its low.”

It also noted that bear markets were normal, pointing out the S&P 500 had endured 26 bear markets since 1928 – and tended to be short-lived.

“The average length of a bear market is 289 days, or about 9.6 months. That’s significantly shorter than the average length of a bull market, which is 991 days or 2.7 years.”

What happened to stocks during 2021?

How does the current situation compare to 2021? Last year was marred by the ongoing impact of Covid-19, with many sectors only slowing getting back up to speed. However, despite the challenges faced by businesses during the year, many of them still managed to enjoy substantial share price hikes.

In fact, some stocks saw their prices more than double in value. Star performers included the British retailer of Swiss watches, Watches of Switzerland Group (WOSG), whose share price rocketed 147% from £5.75 to £14.20 per share over the course of 2021.

Which stocks have been this year’s winners?

There have been clear winners and losers so far in 2022. A look at the share price performances of companies in the UK’s FTSE 100 Index illustrates the point. While the best have seen values rise almost 50% from the start of 2022 to early July, the worst have sunk by similar amounts over the same period.

The top performer has been defence group BAE Systems (BA.), which was up 44.97% over the past six months at the time of writing on 7 July, along with pharmaceutical giant AstraZeneca (AZN), which has risen 32.04%. Educational publishing group Pearson (PSON), meanwhile, was up around 26.3%, while there had been a 22.46% uplift in the share price of Standard Chartered bank.

Analysts’ predictions: What stocks may rebound in the second half?

The question being posed by investors is what stocks to invest in 2022? The good news is that industry observers remain confident many stocks will have a good second half of the year. Among the most tipped stocks in recent weeks have been those in the consumer discretionary sector that has been among the hardest hit during the cost of living crisis.

Wayne Brown, an analyst at Liberum, pointed out share prices had been hammered, valuations were depressed, and the market was still willing to punish those delivering bad news. However, he highlighted retailers B&M (BME) and Frasers Group (FRAS), along with fashion brand Superdry (SDRY) and DIY chain Wickes (WIX) as having among the most potential:

“We reiterate the stocks that we believe are most likely to deliver the opposite. Share prices are assuming the worst/more bad news to come, but where we expect earnings resilience or positive surprises.”

It is important to note that this article does not constitute financial or investment advice. Before you choose to invest in any stock, always do your own research and remember that your decision should be based on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. There are no guarantees. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which it trades and your risk tolerance. And never invest money that you cannot afford to lose.

FAQs

What stock will grow the most in 2022?

It’s not clear. A number of factors influence whether a stock rises or falls in value. While some of these are governed by the company itself, others are out of its control. For example, wider falls in stock markets can impact even strongly performing stocks.

What is the stock market outlook for 2022?

Lewis Grant, head of global equities at Federated Hermes Limited, pointed out investors had alternated between fears of inflation and fears of recession.

“Neither inflation nor recession is a positive for equity markets; stagflation would be particularly challenging,” he said. “As the first half of 2022 draws to a close and equity markets are again a sea of red, it appears investors share our concerns.”

When will the stock market rebound?

There are too many uncertainties to be sure. Ben Yearsley, director of Shore Financial Planning, suggested the UK stock market earnings were a bright spark in the global gloom:

“It does feel as if the UK stock market could be the one to watch over the coming few years as the absence of high growth names (once a problem) is now a positive.”

Further reading:

EU50 forecast: Macro factors and war drums weigh on prospects The European currency is the euro. The stock market. The foreign exchange market. The European flag. Stock market chart. UES. 50 euros. The value of money.

Hang Seng index name on a screen

 



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