Citi has named a number of stocks that it believes could do well in the second half of 2022 as investors continue to navigate market uncertainty and hot inflation. The stock markets suffered steep losses in the first six months of this year, as a persistent sell-off brought major indices to their knees. The S&P 500 endured dizzying fluctuations before closing in the first half of bear market territory, sending the index to its worst performance in the first half since 1970. With the second half now underway, investors are preparing for continued volatility as fears of recession rise . According to Citi, this has put the stock selection in focus. “While the stock market is likely to remain in the grip of macro considerations, stock-specific differentiation will be a critical focus,” Citi’s strategist, led by Scott Chronert, said in a June 29 report. “We expect business models to be tested,” they wrote, emphasizing the company’s management ability to navigate a range of issues such as labor and supply chains. Read more ‘Dividend aristocrats’: Strategists name high-yield stocks to run out of bear market Chronert acknowledged rising recession risks and placed the odds of a global recession at 50%. Recession is most likely an event in 2023 – if it turns out, he said. Meanwhile, soaring consumer prices continue to weigh on investor sentiment, with decades of high inflation sweeping across multiple economies, including the United States, Europe and parts of Asia. Equities that can handle higher inflation. How should investors position themselves in such an environment? Pricing power, which refers to a company’s ability to raise prices without losing business, gives companies a head start amid rising prices. Such companies tend to cope with an inflationary environment better than the competitors because they can pass on higher costs to the customers. Citi’s top choice of top-rated companies with the largest pricing includes Estee Lauder, Kellogg, Chipotle and Domino’s Pizza in the consumer area, as well as Thermo Fisher Scientific and HCA Healthcare in the healthcare area. The bank also likes Amazon, Microsoft, Atlassian and CrowdStrike in the technology sector. A host of financial stocks also appeared on the bank’s screen, including Allstate Corp, MetLife and Hartford Financial Services. Names of ‘highest conviction’ Citi also compiled a list of its ‘highest conviction ideas’ – the bank’s best stock choice. They include the chemical company Linde, the retailer of auto parts AutoZone, Walmart, the electronics manufacturer Jabil, the wireless operator T-Mobile, the cybersecurity company Fortinet and the biotech company Apellis Pharmaceuticals. Semiconductor equipment manufacturer Lam Research was also on Citi’s list, where the stock enjoys the highest upside to the bank’s price target among the bank’s best stock ideas. The stock closed at around $ 389 on Tuesday trading, representing a potential upside of 85.1% to Citi’s price target of $ 720.
Top stock selection for the second half of 2022