With markets getting whipsawed by concerns over inflation, rising interest rates and Russia’s invasion of Ukraine, analysts at one of Wall Street’s biggest firms still see opportunities despite surging volatility, revealing a list of top stock picks to help investors weather a “perfect storm of headwinds.”
Stocks with strong earnings growth are still good bets even in a down market, Citi analysts say.
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Investors face a challenging environment in which inflation and its effects on supply chains have “remained stubborn,” while Russia’s invasion of Ukraine has caused a surge in commodity prices like oil that has only exacerbated the situation, Scott Chronert, Citi’s managing director and U.S. equity strategist, said in a recent note.
Citi strategists still see light at the end of the tunnel, identifying several stock picks with strong earnings growth expectations in sectors like financials, retail, consumer goods and technology that they think have massive upside potential.
Citi’s favorite large-cap pick is legacy automaker General Motors: While many analysts are excited about the company’s expansion into electric vehicles, shares are down nearly 28% amid the wider market selloff this year.
The firm still predicts a rebound, however, with a $100 per share price target on GM’s stock—implying a potential upside of nearly 130% from its current price of around $44 per share.
Citi analysts also like financial services stocks such as One Main Holdings, which they think can rally over 100%, as well as investment bank Raymond James (over 30% upside) and broker-dealer LPL Financial (over 50% upside).
Other top stock picks from Citi that the firm thinks can rally at least 30% from current levels include solar company Enphase Energy, entertainment giant Walt Disney, plastic manufacturer Berry Global, travel company Trip Advisor and auto parts provider Advanced Auto Parts, among others.
What To Watch For:
Despite the “perfect storm of headwinds” in markets today, Citi expects some of those pressures to moderate by later this year. The recent spike in commodity prices should eventually level out, the analysts predict, which should help with inflation pressures. The Federal Reserve’s forecasted seven rate hikes in 2022, meanwhile, should result in “decelerating but sustainable” GDP growth into next year.
With surging inflation and geopolitical uncertainty from Russia’s invasion of Ukraine dragging markets lower this year, experts are now warning that the threat of stagflation—high inflation and slower economic growth—is looming. Analysts at Jefferies said in a recent note that it’s time to buy companies with high dividend yields and strong cash flows to combat stagflation, recommending healthcare picks such as Pfizer and Medtronic, as well as consumer companies including Procter & Gamble, Best Buy, Hasbro and Home Depot.
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