Every year, the major Wall Street firms we cover here at 24/7 Wall St. come out with their lists of stocks that they feel will be the top performers for the coming year. Despite the recent selling since the Federal Reserve decided to do something about the rampant inflation consumers and businesses are facing, the three major stock indexes are still up near the 20% level. Over the past five years, the markets have averaged a 17.5% gain, so almost regardless of how investors were positioned, they should have done much better than historically.

However, 2022 may be the year when the going gets tougher. Interest rates will be going higher, and companies will face much tougher comparisons than last year. With the median S&P 500 near the highs posted during the dot-com bubble, it is pretty clear stocks are not cheap.
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A new BofA Securities research report features 11 stock picks for 2022, one stock for each of the 11 Global Industry Classification Standard sectors. The analysts noted this when discussing the selection process:

We selected these stocks based on alignment with themes in our 2022 Year Ahead (including High Quality, inflation-protected yield, Value over Growth and/or FCF generators) plus consideration of factors such as fund positioning, our analysts’ 2022 earnings outlook versus consensus, ESGMeterTM and more. Selected stocks are Buy-rated by our fundamental analysts; we also considered our analysts’ views in making our decisions.

While all 11 stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Communication Services: Disney

This company is a top consumer media company with multiple streams of income to push revenue. Walt Disney Co. (NYSE: DIS) is the largest publicly traded media and entertainment company and global leader in producing high-quality, branded family entertainment.

Key assets include its theme parks (six locations globally), the ABC TV network, ESPN, FX, National Geographic and other cable networks, iconic film studios (Disney, LucasFilms, Marvel, Pixar, 20th Century Fox), Star India, direct-to-consumer streaming platforms (Disney+, 66% Hulu stake and ESPN+) and consumer products.

The BofA Securities price target is $192. Walt Disney stock has traded as high as $203.02 in the past year but closed on Friday at $148.76 a share.

Consumer Discretionary: Borg Warner

Shares of this leading original equipment manufacturer have solid upside potential. BorgWarner Inc. (NYSE: BWA) develops, manufactures and sells engineered automotive systems and components primarily for powertrain applications worldwide. The company’s Engine segment offers turbochargers, turbo actuators and timing systems, such as timing chains, variable cam timing products, crankshaft and camshaft sprockets, tensioners, guides and snubbers, HY-VO front-wheel drive transmission chains and four-wheel drive chains.

The analysts note that the company is expected to be an inflation and capital expenditures beneficiary, and they point out that Wall Street has neglected the company’s high quality, strong free-cash-flow yield of 8%.

Investors receive a 1.56% dividend. BofA Securities has a $66 price target, well above the $53.61 consensus target. The stock closed on Friday at $43.63.

Consumer Staples: Mondelez

This sector giant makes good sense for conservative investors. Mondelez International Inc. (NASDAQ: MDLZ) manufactures and markets snack food and beverage products worldwide. It offers biscuits, including cookies, crackers and salted snacks; chocolates, and gums and candies; powdered beverages and coffee; and cheese and grocery products.

Its primary brand portfolio includes LU, Nabisco and Oreo biscuits; Cadbury, Cadbury Dairy Milk and Milka chocolates; Trident gum; Jacobs Kaffee; and Tang powdered beverages.

Mondelez sells its products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities, as well as through independent sales offices and agents.

Shareholders receive a 2.16% dividend. The $70 BofA Securities price target is in line with the $70.52 consensus target. Shares ended Friday trading at $64.96.

Shares of this mega-cap energy leader backed up nicely as oil sold off recently, and they still offer investors an excellent entry point. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
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Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.

The company announced recently that ExxonMobil Catalysts and Licensing has introduced ExxonMobil Renewable Diesel (EMRD) process technology to help meet the evolving needs for mobility, while utilizing renewable feedstock. This new process technology converts feedstocks including, but not limited to, vegetable oils, unconverted cooking oil and animal fats into renewable diesel. Due to significant interest in producing renewable jet fuel as a primary product, Exxon is also developing advanced catalyst and process technology solutions that will offer EMRD process licensees flexibility to tailor the amount of jet fuel versus diesel produced.

The company pays investors a 5.86% dividend. BofA Securities has set a massive $95 price target. The consensus target is $72.25, and the stock closed at $60.03 on Friday.

Financials: Wells Fargo

This large-cap bank is perhaps the best solid value play in the sector for 2022. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.9 trillion in assets.

The company provides banking, insurance, investments, mortgage and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the Internet and mobile banking. It also has offices in 36 countries to support customers who conduct business in the global economy. Wells Fargo serves one in three households in the United States.

Bloomberg reported that the Federal Reserve has privately signaled that it accepted the bank’s proposal for overhauling risk management and governance. The next steps to remove the asset cap include the completion of a third-party review and a full Fed board vote to lift the sanction.

The Wells Fargo dividend yield is 1.66%. BofA Securities has a $60 price target. The consensus target is $53.79, and the stock pulled back almost 5% on Friday to close at $47.95.

Health Care: CVS

This top stock gapped up in early November but has come back in and offers a much better entry point. CVS Health Corp. (NYSE: CVS) is one of the largest health care companies in the United States, providing retail, mail and specialty pharmacy dispensing services and pharmacy benefits. CVS has become one of the most vertically integrated publicly traded health care companies.

CVS serves employers, insurance companies, unions, government employee groups, health plans, prescription drug plans, Medicaid managed care plans, plans offered on public health insurance and private health insurance exchanges, other sponsors of health benefit plans and individuals. This segment operates retail specialty pharmacy stores and specialty mail order, mail order dispensing, and compounding pharmacies, as well as branches for infusion and enteral nutrition services.

CVS completed a $69 billion purchase of health care provider Aetna in November of 2018 and remains one of the top picks for 2022 and beyond, as CVS has become one of the most vertically integrated publicly traded health care companies, and health care has lagged the S&P 500 significantly this year.

Investors receive a 2.19% dividend. The $115 BofA Securities price target compares with a $110.08 consensus target and the most recent close at $100.36.

Industrials: Eaton

While perhaps less known than some of the other top picks, this is a solid buy for growth and income investors. Eaton Corp. (NYSE: ETN) operates as a power management company worldwide. Its Electrical Products segment offers electrical and industrial components, wiring devices and structural support systems, as well as residential, single-phase power quality, emergency lighting and fire detection, and circuit protection and lighting products.

The company’s Electrical Systems and Services segment provides power distribution and assemblies, three-phase power quality products, hazardous duty electrical equipment, explosion-proof instrumentation, utility power distribution equipment, power reliability equipment and services.

Eaton’s Hydraulics segment offers power, controls and sensing and fluid conveyance products, as well as filtration systems solutions, industrial drum and disc brakes and golf grips. The company’s Aerospace segment provides hydraulic power generation and fuel systems, controls and sensing, and fluid and conveyance products for commercial and military use.

Investors receive a 1.84% dividend. The price target at BofA Securities is $205. The $181.35 consensus target is closer to Friday’s $165.07 close.

Information Technology: F5

This stock has had a strong run in 2021 and looks to continue the trend next year. F5 Networks Inc. (NASDAQ: FFIV) provides multi-cloud application security and delivery solutions for the security, performance and availability of network applications, servers and storage systems.

The company’s multi-cloud application security and delivery solutions enable its customers to develop, deploy, operate, secure and govern applications in any architecture, from on-premises to the public cloud.

F5 offers application security and delivery products, including BIG-IP appliances and VIPRION chassis and related software modules and software-only Virtual Editions; Local Traffic Manager and DNS Services; Advanced Firewall Manager and Policy Enforcement Manager that leverage the unique performance characteristics of its hardware and software architecture; Application Security Manager and Access Policy Manager; NGINX Plus and NGINX Controller; Shape Defense and Enterprise Defense; Secure Web Gateway, and Silverline DDoS and Application security offerings; and online fraud and abuse prevention solutions.

BofA Securities has set a $285 price target. The $242.93 consensus compares with Friday’s final print of $233.

This stock has rallied smartly off the March lows and is another safe haven for conservative investors. Eastman Chemical Co. (NYSE: EMN) engages in the provision of specialty chemicals. It operates through the following segments.
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The Additives and Functional Products segment includes chemicals for products in the transportation, consumables, building and construction, animal nutrition, crop protection, energy, personal and home care, and other markets. The Fiber segment offers cellulose acetate tow for use in filtration media, primarily cigarette filters.

The Advanced Materials segment of Eastman Chemical produces and markets its polymers, films and plastics with differentiated performance properties for value-added end uses in transportation, consumables, building and construction, durable goods, and health and wellness markets.

The Chemical Intermediates segment consists of large-scale and vertical integration from the cellulose and acetyl, olefins and alkylamines streams to support operating segments with advantaged cost positions.

Investors receive a 2.56% dividend. The BofA Securities price objective was last seen at $125. The consensus target is higher at $134.43. Shares closed on Friday at $118.68.

Real Estate: Welltower

This company pays a solid distribution and is a pure play on the aging U.S. population. Welltower Inc. (NYSE: WELL) is a fully integrated and self-administered real estate investment trust (REIT) invested across the full spectrum of health care real estate.

The company also offers property management and development services. As of last year, Welltower had ownership interests in nearly 1,400 facilities in high growth markets in the United States, the United Kingdom and Canada, across senior housing triple-net, senior housing operating, skilled nursing/post-acute and medical office buildings.

Shareholders are paid a 2.93% distribution. The BofA Securities price target is $95. The consensus target is $93.08, and the stock closed on Friday at $83.20.

Utilities: NRG

This stock has made a nice run off the lows and is a solid idea for more conservative investors. NRG Energy Inc. (NYSE: NRG) in as an integrated power company in the United States involved in the producing, selling and delivering electricity and related products and services to 3.6 million residential, industrial and commercial consumers.

The company generates electricity using natural gas, coal, oil, solar, nuclear and battery storage. The company also provides system power, distributed generation, renewable products, backup generation, storage and distributed solar, demand response, energy efficiency, advisory and on-site energy solutions, as well as carbon management and specialty services.

In addition, NRG trades in electric power, natural gas and related commodities; environmental products; weather products; and financial products, including forwards, futures, options and swaps. Further, the company procures fuels, provides transportation services, and directly sells energy, services and products and services to retail customers under the NRG, Reliant, Green Mountain Energy, Stream, XOOM Energy, and other brand names.

Investors receive a safe 3.21% dividend. The BofA Securities price objective of $46 compares with a $45.20 consensus figure and Friday’s close at $40.49.

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For investors looking to add stocks for a diversified portfolio, the 11 top picks for 2022 from BofA Securities are the ideal list to work from. Given the potential for year-end volatility, it may make sense to buy partial positions now and perhaps pick up the balance in January.

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