Bank of America Global Research has published the names of 11 companies listed on the Johannesburg Stock Exchange (JSE), labelled as ‘buy ideas’ 2022.
Bank of America (BofA) said that its financial models imply an All-Share target of 81,000 points, or growth of 12% in 2022, following strong growth of 24% in 2021. In mid-day trade on Wednesday, the All-Share Index traded at 72,314 points.
The bank has revised its 2021 growth estimate down to 4.6% from 5.1%, following a weaker than expected third-quarter contraction. “Omicron has since faded, removing a dampener on 2022 growth,” it said. “We forecast 1.8% economic growth in 2022.”
Risks, it said, are tilted to the downside. Load shedding, labour strikes, and politically-induced protests that tap into social tensions, are key to watch.
The financial services firm noted that the inflation outlook is weaker in 2022, averaging 4.7% compared to 4.5% in 2021. “We believe the SARB could frontload four hikes of 25bps each within the first five meetings, starting in January,” BofA said.
It pointed to the following stocks as buy-rated by BofA fundamental analysts:
“We are still constructive on SA banks into 2022,” BofA said. Higher interest rates and improving asset growth should drive revenue growth to the highest levels over 2022/23 – since at least 2015.
It said that local insurers should benefit from reducing Covid losses and a continued rebound in sales, bringing both sales & profitability to pre-Covid levels.
For the Consumer Staples Sector, and Industrials, BofA said that quality compounders are preferred.
“We have a preference for high-quality compounders. Online is more of a differentiator and is helping drive above-average growth and market share at SHP (Shoprite) and TFG (The Foschini Group), in our view.”
“Our top picks are Shoprite, Clicks, Mr Price and Bidcorp,” it said. “That said, key cyclicals trade at compelling valuations.”
BofA said it has buy ratings on TFG, Truworths & Massmart. “We retain our Underperform on Tiger Brands. In Industrials we like Barloworld & Bidvest given attractive valuations & strong earnings momentum,” it said.
In Healthcare, it has buys on Life (strong AMG outlook, cost savings supportive) and Netcare (cost savings underappreciated by market). Aspen, it said, is well placed to distribute affordable vaccinations into Africa, given its existing networks.
BofA said that at 50% of demand for most mined commodities, China looms large in its thinking. “A hard landing is not our base case, but we are wary of potential risks related to property,” it said.
The bank also put buy tags on Anglo American (volume growth, self-help, PGMs, Diamonds), Glencore (copper, coal), South32 (Aluminium).