Rising risk of the Omicron variant and record levels of inflation suggests it could be a bumpy ride for investors in 2022. For protection, Strategic Wealth Partners’ Mark Tepper says it’s time to switch to the “defensive growth stocks”.
Tepper’s pick for 2022
One name in particular that pops out to him is BJ’s Wholesale Club Holdings Inc (NYSE: BJ). Making his case for the retailer on CNBC’s “Worldwide Exchange”, Tepper said:
It’s defensive in that it’s a consumer staple, and when inflation’s hot, consumers start looking for discounts wherever they can get them. So, they start buying in bulk. BJ’s is the relative value play versus Costco. It trades at about 50% valuation discount but is growing at twice the pace of Costco.
He agreed that BJ’s should not trade at a multiple identical to Costco, but a 50% discount, he added, still suggests there’s a lot of room for the stock to run in 2022. BJ’s is up more than 70% in the stock market this year.
Tepper’s outlook on mega-cap tech
Amidst concerns of inflation and the Omicron variant, the mega-cap technology stocks got hammered last week, and Tepper expects it to continue in the coming months.
I think you’ll see money continue to move into shorter duration stocks that are generating cash flow, earnings, paying dividends, engaging in share buybacks. They haven’t been favoured over the last decade, but that’s what you’re going to see happen, and that’s what’s happening right now.
Tepper reiterated that a pivot on slowing economic growth could also see cyclicals like energy lose pace in 2022. Last week, RBC’s Modi had picked Coca-Cola as his top consumer staple stock for next year.
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