27 Stocks to Buy for 2022, 'the Year of the Stock Picker' – Business Insider

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  • S&P 500 returns will be more lackluster in 2022, Morgan Stanley says.
  • They anticipate higher volatility as a result of the ongoing economic recovery. 
  • The bank said investors are better off picking individual stocks in 2022.

Index investors have been lucky in 2021: this has so far been one of the better years of the past decade, with the S&P 500 returning 25% over the last 10-and-a-half months. What’s more, it’s up an extraordinary 104% since the March 2020 bottom.

For context, the index has returned an average of 10.2% per year including dividends since 1965, according to Berkshire Hathaway data.

But according to strategists at Morgan Stanley, the fun will come to a halt in 2022 for the broad blue-chip index. Their base case for the S&P 500 next year is 4,400, down 6% from current levels at 4,700. Their bull case target of 5,000 would be a 6% gain. 

To find more impressive returns next year, the bank is instead recommending individual stock selection. In a Monday note to clients, they said 2022 would be “the year of the stock picker.” This is because they anticipate broader volatility as the market digests the uncertainty surrounding the economic recovery. 

“We have compared this period to the post-WWII era during which we experienced 5 recessions in the 16 years that followed. What this means for investors is more of a boom/bust environment plagued by higher prices/costs and unpredictable supply and demand,” Mike Wilson, Morgan Stanley’s chief US equity strategist, said in the note.

“As we think about our forecasts for the year ahead, our key message centers around multiple contraction amid a continued mid cycle de-rating, higher bond yields, and greater economic and earnings uncertainty,” he continued. “Bottom line, 2022 will be more about stocks than sectors or styles, in our view.”

To give investors ideas on individual stock picks, they gave five different lists focusing on different themes. Below, we’ve compiled their list of growth stocks at a reasonable price, which they also rate as “quality stocks” and which their analysts rate as “equal weight” or “overweight.” They are listed in order of sector.

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