Stocks you might want to buy into this year

Six options to consider as part of your 2022 investment strategy.

Moneyweb, Investing

2022-01-26 05:30:00 PM

Here are six options to consider, along with the reasons why investing in the stock market gives you a chance to earn better returns. chantal_marx Moneyweb Investing

Six options to consider as part of your 2022 investment strategy.

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chantal_marx Thanks guys, great insight. Enjoyed reading this.

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Investing in the stock market gives you a chance to earn better returns as opposed to leaving your money dormant in your bank account. Here are six options to consider, along with the reasons why. BHP Group (BHP) BHP is the world’s largest diversified natural resources company. Its objective is to create long-term shareholder value through the discovery, development, and conversion of natural resources. BHP’s main exposures are to iron ore, copper, coal, and oil and gas. We expect potential upgrades to consensus earnings of up to 26% over the next two quarters if spot prices prevail. The collapse of its dual listed company (DLC) structure may provide the group with strategic flexibility to improve shareholder value, including but not limited to the elimination of the discount of Plc shares to Limited, and more options of providing shareholder returns, including the unbundling of petroleum and potential share buy-backs. The unbundling of petroleum has the potential to enhance shareholder returns in a potential multiple rerating for BHP as it exits fossil fuel assets and free cash flow improves due to high capital intensity of petroleum, contributing 33% of group capex but only 8% of earnings. BHP main commodity basket price movements Source: Bloomberg, FNB SPM Prosus (PRX) We continue to like the sector and believe there is significant upside to both the Tencent and Prosus share price. MultiChoice (MCG) The MultiChoice Group (MCG) is a South Africa-based media company that provides digital satellite television (Direct to Home or DTH) and digital terrestrial television (DTT) services, and online solutions (Video on Demand or VOD). The group holds 75% of MultiChoice SA, as well as MultiChoice Africa, Irdeto and Showmax (a standalone over-the-top [OTT] product focused on local and international content). The company’s share price has come under pressure as a result of a misunderstanding around a regulatory dispute in Nigeria as well as concerns over the repatriation of cash from more challenging operating jurisdictions. Still, MCG is trading at quite a sizeable discount relative to peers and its own history, which looks compelling in the context of strong earnings growth ahead and a forward dividend yield in excess of 5%. Multichoice EV/Ebitda (enteprise value to earnings before interest, tax, depreciation and amortisation) versus peers Source: Bloomberg, FNB SPM Karooooo (KRO) Karooooo is a global Software-as-a-Service (SaaS) provider of mobility solutions for small, medium and large fleets. The company also provides insurance analytics, security and safety products for both businesses and consumers. The business is vertically integrated, which provides complete autonomy regarding the development of its applications and innovation. Results for the quarter to November 30 were decent, with the bottom-line result benefiting from robust top-line growth and lower effective tax rate. Good subscriber growth numbers contributed positively to revenue growth, while the inclusion of recent acquisitions also assisted. Operating expense growth was high but anticipated given management’s aggressive growth plans. However, the pace of revenue growth was ahead of cost growth, which resulted in margin gains. The company remains highly cash-generative, and management maintained FY22 guidance. Samsung Electronics (005930 KS) Samsung operates four business divisions: Consumer Electronics (CE), Information Technology & Mobile Communications (IM), Device Solutions (DS) and Harman. CE includes traditional electronics and IM includes mobile phones and computers. DS includes semiconductors and display. Harman includes connected car systems, audio and visual products, and connected services. Although the semiconductor memory market is cyclical, the sector is set to deliver double-digit growth on average over the medium term as new technology products require memory chips to run. The foundry business is particularly well positioned – with recent guidance from Taiwan Semiconductor Manufacturing Company providing a positive read-across. Samsung has a very strong balance sheet with a high net cash position. Samsung trades on lower multiples than its global peers and has derated over the last few months but is set to deliver double-digit earnings growth over our forecast horizon. Samsung forward PE (price-earnings) history Source: Bloomberg, FNB SPM Alibaba (BABA US) From a simple e-commerce platform enabling small businesses to trade goods and raw materials, Alibaba has grown into a commercial giant that has revolutionised Chinese retail and aims to become integral to a new and global digital economy. Alibaba trades on considerably lower multiples than its global online retail peers against a substantially higher growth rate. This was exacerbated by fears over regulatory intervention by the Chinese state. The company is adapting to new legislation. Moreover, China credit metrics seem to be improving, which could bode well for the strength of that economy. Alibaba premium/(discount) to peers Source: Bloomberg, FNB SPM As we start moving slowly beyond Covid-19, not sure of where to invest, consult with a professional financial advisor who will help you through the process. Investing in stocks or shares is a great way to kick-start your investment strategy. Chantal Marx is head of investment research at FNB Wealth and Investments. jQuery(document).on('click', 'a[href*="#to-comments"]', function (event) { event.preventDefault(); jQuery('html, body').animate({ scrollTop: jQuery(jQuery.attr(this, 'href')).offset().top }, 500); }); jQuery(document).ready(function () { jQuery('img[class*="wp-image-"]').bind('click', function () { jQuery(this.parentElement).lightBox({ imageLoading:"https://www.moneyweb.co.za/wp-content/themes/moneyweb-domination/images/spinner_moneyweb.gif", imageBtnPrev:"https://www.moneyweb.co.za/wp-content/themes/moneyweb-domination/images/bg_direction_nav.png", imageBtnNext:"https://www.moneyweb.co.za/wp-content/themes/moneyweb-domination/images/bg_direction_nav.png", }) }); function getSelectedText() { if (window.getSelection) { var range=window.getSelection(); return range.toString() } else { if (document.selection.createRange) { var range=document.selection.createRange(); return range.text } } } function createTweetLink(text, e) { var oldTweetLink=document.getElementById("tweetLink"); if (oldTweetLink !=null && typeof oldTweetLink !="undefined") { oldTweetLink.parentNode.removeChild(oldTweetLink); } if (text==="") return undefined; var newTweetLink=document.createElement("a"); newTweetLink.href="https://twitter.com/intent/tweet?text=" + encodeURI(text) +"&url=https://www.moneyweb.co.za/investing/equities/stocks-you-might-want-to-buy-into-this-year/&via=Moneyweb"; newTweetLink.id="tweetLink"; newTweetLink.target="_blank"; newTweetLink.innerHTML=' Tweet'; var appendedTweetLink=document.getElementById("article-body-content").appendChild(newTweetLink); var x=(e.clientX + 5) + 'px', y=(e.clientY + 5) + 'px'; jQuery(appendedTweetLink).css({ "top": y, "left": x }); return newTweetLink; } var textParagraph=document.getElementById("textParagraph"); if (textParagraph) { textParagraph.addEventListener("mouseup", function (e) { tweetLink=createTweetLink(getSelectedText(), e); }, false); } });