For investors, 2022 was a turbulent year. Investors saw a decline in the value of their shares, homeowners saw their home values fall by the most significant margin in decades, and savers were disadvantaged since interest rates increased but failed to keep up with inflation.
In that case, where can we expect to find promising investment prospects in the next year? To find out, we consulted the professionals.
In an interview with CNBC, Mark Lister, investment director at Craigs Investment Partners, predicted that the real economy will be hit worse than the financial markets.
Although the financial markets struggled in 2022, the economy performed well.
Even if a recession hits [in 2023], investors will focus on the road to recovery. Because it expects economic difficulty in the future, it has spent all of 2021 and 2022 in a downward trend. When that moment comes, we’ll be ready to go on to the next stage—the recovery.
He said consumer spending would decrease as loan rates increased, hurting business profits. The magnitude of the blow, though, was still unclear.
Since its high over two years ago, the stock market has fallen by 15%. “The market isn’t terrible, and our firms are doing OK. The year will continue to be an assortment of events.
Lister said he would advise investors to stay in well-managed businesses with minimal debt and resilient profitability that provide products that consumers want to purchase regardless of economic conditions.
For instance, he added that businesses related to electricity were relatively immune to the economic downturn. We have it covered with Chorus and Infratil’s infrastructure. High inflation is beneficial to the infrastructure sector. Spark is also able to persevere through adversity. Those industries will be able to stay open during this difficult time. All of the corporations have total dividend payouts.
He predicted a turnaround for “beaten up” businesses, including A2 Milk, Tourism Holdings, and Sky City, during the next 12 months.
Devon Funds Management’s retail head Greg Smith agreed that companies involved in the generation and distribution of electrical power had the potential to provide positive returns for shareholders.
New Zealand is continuing its electrification, and if the current extension or discussion about Tiwai can be completed, it will provide more assistance for the industry. In that area, the renewables narrative continues.
He also noted the health of commercial real estate companies. Precinct Property had an excellent occupancy rate and was continuing its development plans.
Smith speculated that companies like Freightways, seen as “pandemic benefactors,” may perform well.
He advised avoiding highly indebted companies. “Investors will need to exercise caution as the economy faces some hurdles in the future.”
A faster-than-expected decline in inflation, as well as China’s reopening, may offer a boost to the market.
If New Zealanders haven’t already, now might be the time to consider diversifying their portfolios internationally. The economic future in Australia is less uncertain than that in New Zealand.
Grant Davies, an advisor at Hamilton Hindin Greene, provided a cautiously optimistic forecast for 2023. There were a few firms available at reasonable prices.
Genesis and Infratil had promise, he acknowledged. “[Infratil] has established an attractive portfolio of businesses, with a strong cash flow generation and development potential. Their company is involved in four markets: clean energy, information technology, medical services, and transportation hubs.
It was also claimed that the NZX Group had great promise. Because it is the default provider for KiwiSaver, it will have “strong tailwinds” for its investment management business.
While short-term performance is subject to market fluctuations, this is a significant factor in the 43% decline in share price from its high of $2.15 last year to $1.22 today.
He also suggested that Investore had potential. When interest rates started to climb in 2022, its stock price plummeted by 23%.
“While its specific interest rates will continue to climb from here, new data suggests rate increases have started to outpace inflation, which could restrain additional rate increases. There is a chance that Investore might gain if inflation keeps rising faster than expected.
Across New Zealand, 63% of Investore’s large-format retail premises are Countdown supermarkets. Over the following three fiscal years, the whole Countdown-anchored portfolio will be reviewed.
The market is pricing in decline in the value of the company’s assets, as shown by the fact that the stock trades at a discount of 33% to its net tangible asset of $2.21 per share. The current pricing is reasonable and accurately represents the changes in interest rates we’ve witnessed over the previous year.
He also noted the potential for growth at the Auckland Airport and the airport’s ownership in Queenstown’s expansion.
