Citi has named a number of stocks that it thinks could do well in the second half of 2022 as investors continue to navigate market uncertainty and hot inflation. Equity markets suffered severe losses in the first six months of this year as an unrelenting sell-off brought major indices to their knees. The S&P 500 experienced dizzying swings before completing the first half in bear market territory, sending the index on its worst first-half performance since the 1970s. With the second half now underway, investors are bracing for continued volatility as recession fears mount. This has brought stock selection into focus, according to Citi. “Although the stock market is likely to remain in the grip of macroeconomic considerations, stock differentiation will be a critical focus,” Citi strategists led by Scott Chronert said in a June report. 29. “We expect business models to be tested,” they wrote, emphasizing the ability of company management to address a range of issues such as workforce and supply chain. Read more ‘Dividend Aristocrats’: Strategists name high-yielding stocks to weather bear market Wall Street believes these battered global stocks are poised for recovery Wall Street banks name their top global stocks for the second half — and give three up to 70% Chronert acknowledged rising recession risks and put the probability of a global recession at 50%. The recession is most likely a 2023 event — if it materializes, he said. Meanwhile, soaring consumer prices continue to weigh on investor sentiment, with decades of inflation sweeping across several economies, including the US, Europe and parts of Asia. Stocks that can withstand higher inflation How should investors position themselves in such an environment? Pricing power, which refers to a company’s ability to increase prices without losing business, gives companies an advantage when prices rise. Such companies tend to weather an inflationary environment better than their competitors because they can pass higher costs on to customers. Citi’s top picks from recommended buy companies with the greatest pricing power include Estee Lauder, Kellogg, Chipotle and Domino’s Pizza in the consumer space, and Thermo Fisher Scientific and HCA Healthcare in the healthcare space. The bank also likes Amazon, Microsoft, Atlassian, and CrowdStrike in the tech space. A number of financial stocks also appeared on the bank’s screen, including Allstate Corp, MetLife and Hartford Financial Services. “Highest Conviction” Names Citi also compiled a list of their “highest conviction ideas” — the bank’s top stock picks. These include chemical company Linde, auto parts retailer AutoZone, Walmart, electronics maker Jabil, wireless service provider T-Mobile, cybersecurity company Fortinet, and biotech company Apellis Pharmaceuticals. Semiconductor equipment maker Lam Research was also on Citi’s list, with the stock showing the highest upside potential versus the bank’s price target among the bank’s top stock ideas. The stock closed at around $389 on Tuesday, which represents a potential upside of 85.1% versus Citi’s price target of $720.
Top stock picks for the second half of 2022
