How the share tipsters fared in 2021, and what they are tipping for 2022
MoneyWeek’s comprehensive review of the year's share tips from the rest of the UK's financial pages, and a look at what shares they're tipping for 2022.
Global stockmarkets roared in 2021, but most of the share tipsters were left behind. Only three managed to beat their relevant market benchmark, with many annual portfolios badly off the pace.
US publication Barron’s tops the table this year. Its ten tips for 2021 returned an average of 26.9%. That looks impressive, but it is exactly the same as the return on the S&P 500, the US stock benchmark. Investors would have done just as well putting their money into a US market tracker than going to the trouble of buying individual stocks. Barron’s best tip was Google-owner Alphabet, up 67.4%. The worst – and its only tip to lose money – was concert venue business Madison Square Garden Entertainment, which fell 22.2% as the hoped-for pandemic recovery failed to materialise.
The most impressive performance arguably belongs to second-placed Interactive Investor’s Aim portfolio. Last year’s table-topper delivered again with a 25.8% gain, comfortably beating the benchmark Aim All-Share’s 5% gain for the year. The performance is a reminder that small-caps can offer rich pickings for those prepared to do their research and take some risk. The best tip was lettings and sales estate agent Belvoir Group, which gained 58.9%. The worst was health-diagnostics business SourceBio International, which ended the year down 6.3% despite strong demand for its Covid-19 testing services.
The bronze goes to The Daily Telegraph, which returned 16%, beating the FTSE 100’s 14.3% return. Bakery chain Greggs, up 93.6%, was its best idea. Software group Sage, up 45.3%, was another excellent pick. Less happily, a bet on a recovery at airline easyJet (down 13.7%) proved premature.
The Investors’ Chronicle is the only other portfolio to have beaten the FTSE in 2021. Its selection of 50 tips returned an average of 15.3%. Its best idea was chip specialist Nvidia, which saw its shares surge 124.3% as the world scrambled for semiconductors. The worst was respiratory protection specialist Avon Rubber, which finished the year down 64.6%. The magazine has yet to publish its tips for 2022.
The rest underperform
Shares’ portfolio disappointed, delivering an 8.6% average return. The magazine points out that its annual portfolio has still beaten the FTSE in seven of the last ten years. Its best tip was transport-analytics firm Tracsis (up 57.8%), but those gains were wiped out by bets on two 2020 pandemic winners that ran into headwinds in 2021. Chinese e-commerce giant Alibaba fell 52.2% amid a regulatory clampdown, while online supermarket Ocado tumbled 25.9% as a lack of news about new clients for its tech platform saw some investors lose interest.
The Times’ best tip was banking group HSBC, which rose 18% as the pandemic saw fewer loans go sour than feared. Only wargames retailer Games Workshop (down 12%) lost money, but unimpressive returns on the rest of the portfolio left the portfolio in mid-table mediocrity this year.
It was nearly a disastrous year for the Daily Mail, with all but one of its tips losing money. Irish biotech Amryt Pharma did worst, losing 19%, while a commodity bet on miner Rio Tinto also came unstuck, finishing the year down 11%. Asset manager Liontrust single-handedly rescued the portfolio from humiliation by delivering a superb 69% return as it taps into the environmental, social and governance (ESG) investment trend.
The Sunday Times’ portfolio narrowly avoided a loss. Startup investor Chrysalis Investments gained 29%, but bad bets on easyJet and publisher Pearson dragged down the portfolio. The worst idea was biotherapeutics firm PureTech, which fell 27.1%.
The wooden spoon goes to the Evening Standard for a second year. OneSavings Bank (up 32.7%) proved its best idea, but the rest of the portfolio was dragged down by ill-timed re-opening bets on British Airways owner IAG (down 4.9%), office operator IWG (down 14.3%) and London estate agent Foxtons, which fell 21.6%. The paper has yet to publish any tips for 2022.
|Tipsters’ performance in the last five years|
|The Daily Telegraph||21.5%||-13.4%||9.6%||-1.3%||16%|
|The Sunday Times||12.2%||-20.1%||30.8%||7%||2.3%|
Share tips for 2022
Amazon boasts a 40% share of the American e-commerce sector and accounts for half of the cloud-computing market. On 66 times forecast 2022 earnings the shares aren’t cheap, but a huge addressable market gives it some of the most promising growth prospects of any of the big tech giants ($3,377). Shares in telecom AT&T recently hit a 13-year low on fears about competition from the likes of T-Mobile. The upcoming spinoff of its WarnerMedia division will streamline the company, which is poised to pay one of the highest dividends in the S&P 500 this year ($23.75). Shares in Warren Buffett’s Berkshire Hathaway have climbed 31% over the past year and a robust, diversified portfolio should see it continue to deliver ($300.5).
General Motors is trying to muscle its way into the electric vehicle game. Investors are sceptical, but on just eight times projected 2022 earnings the shares are valued at a fraction of Tesla’s sky-high valuation ($58.4). Car shortages have driven soaring demand for Hertz’s rental vehicles. Freshly emerged from chapter 11 bankruptcy, the company is ready to take on 2022 with a clean slate ($21). After a decade of stagnation, IBM has refocused its efforts on artificial intelligence and the cloud. It could be “one of the big turnaround stories of 2022” ($126).
Healthcare giant Johnson & Johnson is spinning off its consumer arm to focus on its “underappreciated” drug division. The shares trade on a “reasonable” 17 times forecast 2022 earnings ($173). A tidier physical footprint, cheap valuation and takeover interest could make this a good year for luxury department store chain Nordstrom ($20). Energy prices could be heading higher and Royal Dutch Shell offers exposure at a cheaper price than US oil majors (1,621.75p). Payments juggernaut Visa should benefit as international travel resumes ($214.5).
Marketing consultancy Ebiquity helps top advertisers decide how to spend their budgets across 75 markets globally. The group may attract a takeover bid from a bigger media and marketing firm (52.5p). eEnergy Group helps industrial and educational institutions reduce their energy consumption via LED light installation and smart meters. On 13 times prospective 2021-2022 earnings, the shares are cheap given solid cash generation and strong growth prospects (13p). Rising costs have eaten into profits at gift wrap producer IG Design Group. Markets can be unforgiving after profit warnings, but diversification into craft supplies should reduce the group’s dependence on Christmas sales, so “buy for recovery” (270.5p).
Shield Therapeutics’ Accrufer iron-deficiency treatment is being rolled out in the US. Management hopes that the oral treatment will prove more popular than existing injectable and salt-based remedies. If the drug proves a hit then the cash will come rolling in (32.5p). Energy-services group Sureserve helps local authorities comply with gas, fire, electrical and water regulations; a second division offers efficiency products such as insulation. Compliance is a steady business that provides reliable earnings, while the efficiency side has promising growth potential (93.5p).
Annual share tip portfolios are presented in a spirit of seasonal fun and should not be taken too seriously. The comparison between portfolios is inexact as some publications liquidate their picks in mid-December, while others do so in the new year. One year is too short a time to expect a carefully chosen share to beat the market. Still, annual tips provide a way to think about some of the key economic trends. Last year started with bold bets on the vaccine-enabled reopening of leisure, travel and hospitality, which went south as Covid-19 served up successive new variants. Some tipsters are clearly feeling more optimistic than others about what awaits us during the year ahead.
The Daily Telegraph
Shares in discount retailer B&M European Value Retail have soared 21% over the past year to near an all-time high. However, soaring inflation is likely to push even more shoppers through its doors during the year ahead (634p).
IT kit supplier Computacenter once had a reputation as a “slow and steady” business, but lockdowns and working from home have given the shares some pizzazz. The company has reported six increases in its profit guidance over the last two years and, in November, it won a contract to provide half a million laptops to schools. The shares look like they should be a safe haven in case of more lockdowns (2,910p). Covid-19 pessimists should also take a look at Games Workshop, the firm behind the Warhammer franchise. More lockdowns would be “sure to boost sales again” and overseas expansion provides another avenue for growth (9,970p).
Oxford Nanopore’s products have been used in “a fifth of all Covid-19 sequencing globally” since the pandemic began. This is another firm that will benefit if more nightmare variants emerge (699.5p).
Not all hedge funds have lost out from the “meme stock” frenzy. Man Group, Britain’s biggest listed hedge fund, has been using machine learning to track popular posts on internet forum Reddit, opting to join the retail investors rather than trying to beat them. Hedge funds profit from market volatility, and there could be plenty of that ahead (227.5p).
Profit upgrades suggest things are finally looking up at Marks & Spencer. Revamped stores and a promising partnership with Ocado powered a 75% rally in the stock last year. There should be more gains to come provided the turnaround plan continues to deliver (231.5p). Energy giant SSE has a strong position in the renewables sector and is attracting interest from activist investors and hedge funds (1,649p). Assuming the pandemic subsides, this year should finally bring a sustained recovery in leisure: footfall in central London had returned to pre-pandemic levels before Omicron. Shares in London West End landlord Shaftesbury are still a third off pre-Covid-19 levels, so there is “plenty of upside” in prospect (615p).
More than 88% of US businesses suffered a data breach in 2020, so there is a huge market for cybersecurity firm Darktrace’s security subscription model (424.75p). Smirnoff and Guinness owner Diageo is the sort of “strong, stable” and “defensive” business a portfolio needs in uncertain times (4,032p). Coach operator National Express Group is enjoying a rebound in demand, with its Spanish and North American arms returning to profitability. The shares are still 45% below pre-pandemic levels, so there should be significant upside when the recovery arrives (257.25p).
The woes of the airline industry have weighed on engine maker Rolls-Royce, but lower costs and a price-to-earnings (p/e) ratio of less than four suggest there could be hidden value in this “bastion of British industry” (122.75p). The pandemic has knocked competitors out of the market, leaving Premier Inn owner Whitbread well-placed to profit from the recovery in the UK and by expanding in Germany (2,994p).
Shares in self-storage operator Safestore recently hit an all-time high, but on a p/e ratio of about 12 there should be more to come given the auspicious growth outlook (1,412p).
The shift to renewables is a big opportunity for power-transformer specialist XP Power: solar and wind produce DC power that needs to be transformed into AC power before it can be used in homes (5,100p). Power cords and cables manufacturer Volex is seeing booming demand from the rollout of electric vehicle charging stations (344.5p).
“It’s not just Primark’s clothing” that is cheap. Shares in parent Associated British Foods are still trading near their pandemic nadir of 14 times forecast 2022 earnings. A forthcoming special dividend and expansion overseas could soon see the share re-rate (1,997.5p). Fears that the housing market will cool are overdone, so buy Barratt Developments. The firm enjoys better margins and returns on equity than most in the sector and surplus cash is likely to turn into extra dividends (748p).
Rising interest rates should bring bigger margins for banks such as Lloyds. The bank’s capital levels are stronger than forecast, which could help fund “acquisition activity” or “special dividends” during the year ahead (47.75p). Investors have yet to forgive support-services group Serco for mistakes that forced it into an emergency rights issue in 2014. Yet it is a much leaner operator today and on just 11 times forward earnings the shares are cheap (134.5p). Shares in Tesco trade on a discount to their five-year average, which could attract takeover interest in the wake of last year’s private equity takeover of supermarket peer Morrison’s (290p).
The Sunday Times
BT shares have gone nowhere over the past two decades, but the company is at the forefront of the ultra-fast broadband rollout through its Openreach division. Lockdowns have underlined broadband’s central role in the modern economy (169.5p). Shares in commodity trader and miner Glencore soared 53% last year, but there should be more to come. The firm’s cobalt, zinc and copper will be in strong demand as we decarbonise the economy, while generous dividends don’t hurt either (376p). The coming year should be another strong one for private equity: HarbourVest Global Private Equity is one way to gain exposure (2,870p).
FTSE 250 firm Oxford Biomedica is “a world leader in cell and gene therapy” and also helps make the AstraZeneca Covid-19 jab. The shares are down 22% since early November, so now is a good time to buy (1,230p). Engineer Renishaw makes everything from “precision tools to 3D printers” and optical encoders, with the latter in particular demand from the semiconductor industry. That should help drive “robust sales growth” during the year ahead (4,780p). Video-game developer Roblox has had a good pandemic. As a platform that hosts games made by users and developers, it does not depend on a single hit. A recent share price pullback makes this a good time to buy in and bet on the rise of the metaverse ($103).
Translation services business RWS Holdings is “quids-in” following a strong year of trading (650p). E-commerce specialist THG’s shares have plummeted 71% since listing a year ago amid concerns about its corporate governance. But the business stands to gain from soaring interest in “fitness, health and beauty” products, while founder Matt Moulding has “bowed to City pressure and begun searching for a chairman” (229.25p).
The Daily Mail
Shares in British Gas-owner Centrica are down 69% over the past five years, but investments in cleaner energy and better customer service have prompted bets on a turnaround. The shares started rallying in the summer and that should continue into 2022 (72p). IAG , which owns British Airways, has seen its shares plunge by two-thirds over the last two years. Management warns that air traffic demand will not return to pre-pandemic levels until next year, but if pent-up holiday demand drives a recovery from this spring then “surely the only way is up” (142p).
Car dealership chain Inchcape is in “top gear” as shortages drive up the price of used cars. The group operates more than 100 UK dealerships and is present in 32 countries. Continued supply-chain chaos should see demand stay strong, while analysts report the firm has £1.25bn to spend on acquisitions (910p).
Asset manager Liontrust had a roaring 2021 and is “well-placed to pounce” on smaller prey as the industry consolidates (2,200p). Many of Britain’s online “pureplay” retailers are “down on their luck”, as regulatory and supply chain challenges bite. Revolution Beauty, a beauty brand, might avoid some of these issues because it sells in stores as well as online. Beauty products should also benefit from an ebbing pandemic (123p).
Aim-listed sustainable wood specialist Accsys Technologies makes products that replace aluminium and plastic in the construction industry. Demand is soaring thanks to growing regulation, with the firm planning to ramp up production fivefold over the next five years (171.75p).
More than 60% of global advertising spending in 2022 will be digital and Google-owner Alphabet is ideally placed to benefit. It has significant competitive advantages thanks to its ownership of Android, the world’s leading smartphone operating system. On 25.4 times forecast 2022 earnings the shares are not unduly expensive for a tech giant ($2,848).
This could be “a breakthrough year” for gas producer IOG. It will start pumping hydrocarbons from its North Sea Saturn Banks project just in time to benefit from high natural gas prices (30.75p).
Airline Jet2 will ride out the Omicron turmoil thanks to its robust balance sheet, positioning it to fly into 2022 as a top recovery play (972p). Investors are not enthusiastic about London Stock Exchange Group’s $27bn takeover of financial-data provider Refinitiv, but contrarians can see that the move opens the way to better margins and ultimately a higher rating for the shares (6,852p). The recovery of hospitality will give a boost to Loungers, which operates locations that double as cafés in the day and restaurants and bars at night. The format makes maximum use of a site and could also get a boost from the rise of more flexible work patterns (278.5p). The surge in pet-buying is more than a lockdown fad, so Pets at Home looks well placed to have another strong year (467.6p).
Swiss drug giant Roche is “a class act”, with encouraging data on new drugs to treat lymphoma, Alzheimer’s and eye disease, and solid revenue from Covid-19 testing in the meantime (CHF 401.8). Paris-listed Schneider Electric is at the forefront of the push to digitalise and “green” the economy through its electrical control systems, which help homes and factories run more intelligently (€164.66).
Speciality ingredients provider Tate & Lyle is planning to sell its American primary products arm and re-invent itself as a high-margin provider of “sweeteners, texturisers” and “stabilisers” for the global food industry. The shares trade on a near 50% discount to similar firms (650.5p).