Even as economies recover amid the pandemic, markets are signalling loud and clear that the easy gains are behind. Here’s our 10 global stock picks for this year
A s part of our annual tradition for the Lunar New Year, we have picked 10 stocks for our virtual global portfolio outside Singapore. The Edge Singapore’s virtual global portfolio of 10 stocks was created in 2020, in which the portfolio averaged 98.1% returns for that year, strongly outperforming comparable benchmarks. In 2021, this portfolio returned 13.1% and although it was not the best performer, it was still ahead of most comparable benchmarks. Since its inception, this global portfolio is well ahead of comparable benchmarks as illustrated in Chart 1.
This global portfolio was created not solely to keep up with our yearly traditions but also to empower our investors on how to analyse and value companies. More importantly, we want to enable the content we publish to be actionable by readers. It is important to note that the stock picks are not a call to buy the companies. Instead, it should be used to aid investors to make decisions based on their investor risk profiles and objectives, which we have reiterated throughout our previous articles. A savvy and intelligent investor must always research and attempt to understand any stock-related information before taking action.
That said, the stock investing world is filled with a plethora of strategies and personalities, mainly divided by whether they are a trader or investor. Both traders and investors have a common goal of making profits in the stock market but it is their method that differs. Our portfolio mainly focuses on valuing companies based on analysing financial statements. If we think a stock is undervalued, which means its trading price is below what we think the share price should be, then that stock would be deemed a buy.
There are many types of stocks and each is suitable for varying investor profiles. Some of the most popular stock categorisations include dividend-yielding stocks, high-growth stocks, stable mature stocks and speculative turnaround stocks. Each type of stock requires a different method of analysing financial statements to determine the value of the company. For example, a dividend play would require investors to look at the balance sheet to determine the company’s ability to pay dividends, while a mature stock would require investors to focus on assessing whether the company can maintain its margins to ensure its scale and competitive advantage in the industry.
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Given this, our portfolio of 10 stocks attempts to cater to investors on both ends of the risk spectrum. Similar to our 2020 and 2021 portfolios, we highlighted the important features of a stock type that investors should focus on and analyse. We have also learnt from our previous portfolios that just picking the right stocks is not going to cut it — investors need to have the discipline to sell the stocks once price targets have been met or when their business case has changed significantly. This is particularly important for riskier stocks with a shorter-term investment horizon — like companies whose fortunes are turning around.
The 2022 portfolio will be similar to the previous portfolios, where 10 global stocks are picked and allocated equally. The Edge Singapore’s 2021 portfolio was fully liquidated on Jan 26 and the 2022 portfolio will begin on Feb 7, which is the day this issue is published. Accounting for all returns and cash, the portfolio will begin with $224,115. As with previous portfolios, the 2022 portfolio will not account for transaction costs and exchange rate fluctuations in tracking the portfolio performance.
Furthermore, in line with being more practical, we will buy, sell, add or reduce stocks based on our view of the company and general market conditions. Also, to make things more organised and transparent, we will have a trackable virtual portfolio for our stock picks, which will enable our readers to reallocate their portfolios if they wish to mirror our stock picks and portfolio, which will be published in issues whenever there are changes to the portfolio mix.
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Our 2022 portfolio features eight new stocks. However, we have kept two stocks from our 2021 portfolio, namely CrowdStrike and Tianneng Power. Despite their declines in recent months, we believe these are cheap stocks with great prospects. The new list of eight stocks covers sectors ranging from aerospace to waste management, and is equally balanced in terms of geographical exposure. Table 1 illustrates the list of 10 stocks for 2022.
See also:
- Airbus SE: Strap in for a wild post-pandemic ride
- Avantor: Driven by Covid vaccine, demand from biopharma
- Bumi Armada: Possible buoyant outcome for investors
- China Construction Bank Corp: Banking on dividends
- CrowdStrike Holdings: This is one winner we are keeping
- Magna International: Strong node within mobility value chain
- Naver Corp: Portal to growth
- Ohsho Food Service Corp: Low risk yet appetising
- Tianneng Power International: A great bargain
- Waste Management Inc: Where trash becomes cash
