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2022-01-04 20:16

Rate hikes, omicron, inflation, supply chain constraints – there are plenty of headwinds investors are set to face this year. Amidst these challenges, Hightower’s Stephanie Link says the following three stocks look promising for 2022.
Why Link likes Bank of America?
Many expect the U.S. Federal Reserve to raise rates up to three times this year. Naturally, therefore, 2022 will likely be a good year for the Wall Street banks, and Link says the Bank of America (NYSE: BAC) is the best way to benefit from the rate hikes. On CNBC’s “Halftime Report”, she said:

BofA is the most leverages to interest rates and the steeper yield curve. They have a diversified revenue mix and are cutting costs substantially. You’re seeing better demand, and they have a very strong capital position, $26 billion in excess capital.

Other reasons why she likes Bank of America include its massive buyback program. At 12.8 times earnings, Link sees BofA as inexpensive at current levels. BAC closed 2021 with a nearly 50% gain.

IBM is her largest tech position
Another name that pops out to her is IBM Corp (NYSE: IBM) that has already gained more than 20% in less than two months, but Link is convinced the stock is not yet done pleasing its shareholders. IBM is her largest position in technology at this point in time. She added:

I like what the management is doing. They’re in the process of restructuring. They’re selling non-core assets and buying a ton of companies in cloud, AI, quantum, and even blockchain. The M&A activity will lead to better growth and eventually to better margins.

IBM has $35 billion in free cash flow that it can use to buyback stock or increase dividends, making it an even better pick for 2022. It currently trades at 14 times earnings with a dividend yield of 4.8%. The mainframe refresh cycle and the ELA renewal cycle, Link noted, could be another catalyst for the stock this year.

Link sees potential in Wynn Resorts despite Macau concerns
Lastly, Link sees potential in Wynn Resorts (NASDAQ: WYNN) that got hammered last year as China set out to tighten regulations around gambling in Macau. Consequently, the stock closed 2021 down nearly 25%, but she expects a rebound this year. Link said:

The Macau concerns are all in the stock. Wynn has the size and the scale. They have 1,008 rooms and 739 square feet in gaming in Macau. They are going to get a license. Even if the license is for 10 years, I’m fine with it.

The weakness in Macau is being more than offset by the strength in Las Vegas and Boston, she concluded. Peer Jim Lebenthal of Cerity Partners is among other notable bulls of Wynn Resorts.