All the firms that we follow here at 24/7 Wall St. keep a list for their institutional and retail clients of high-conviction stock picks. These generally are the stocks they not only like on a longer-term basis but those that usually have big upside to the assigned target price. With 2021 almost over and the new year right around the corner, many analysts have tweaked their lists to account for potential changes that 2022 could bring.

Each Raymond James analyst who contributes to the firm’s well-respected Analysts Current Favorites list of stocks to buy has to provide one pick in their coverage space for inclusion in the list. Hence, each is considered a favorite choice.

We screened the list looking for stocks that should perform well in an inflationary environment, like the one that many of us now are experiencing firsthand. Typically, hard assets like real estate investment trusts (REITs) are favorable, as well as dividend-paying commodity stocks. We found five that are all rated Strong Buy at Raymond James.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

APA

This company was long considered an industry leader when it was known as Apache, and the stock is perhaps offering one of the best entry points in the sector. APA Corp. (NYSE: APA) explores for and produces oil and gas properties. It has operations in the United States, Egypt and the United Kingdom, as well as has exploration activities offshore Suriname. It also operates gathering, processing and transmission assets in West Texas, as well as holds ownership in four Permian-to-Gulf Coast pipelines.

The company is one of the largest U.S. exploration and production companies, with 2.3 billion barrels of oil equivalent of proven reserves (63% liquids). It is an explorer, acquirer and exploiter a fiscally conservative company that has grown its reserves and production consistently via acquisitions and organic projects.

APA stock investors receive a 1.87% dividend. The Raymond James price target is $45, well above the $27.63 consensus target. The share price rallied over 7% to close at $27.97 on Monday after the company signed a massive deal with Egypt.

The shares of this company have had a nice move and look poised to trade higher. Kite Realty Group Trust (NYSE: KRG) is a full-service, vertically integrated REIT that provides communities with convenient and beneficial shopping experiences.

The company connects consumers to retailers in desirable markets through its portfolio of neighborhood, community and lifestyle centers. Using operational, development and redevelopment expertise, the company continuously optimizes its portfolio to maximize value and return to its shareholders.

Shareholders receive a 3.34% distribution. Raymond James team has a $25 price target on Kite Realty Group Trust stock. The consensus target is $24.50, and shares closed on Thursday at $21.56 apiece.

Public Storage

This giant self-storage leader has always been a go-to REIT stock for income investors. Public Storage Inc. (NYSE: PSA) is a fully integrated, self-administered and self-managed REIT that primarily acquires, develops, owns and operates self-storage facilities.

As of September 30, 2020, the company had interests in 2,504 self-storage facilities located in 38 states with approximately 171 million net rentable square feet in the United States. It had an approximate 35% common equity interest in Shurgard Self Storage, which owned 239 self-storage facilities located in seven Western European nations with approximately 13 million net rentable square feet operated under the Shurgard brand.

Furthermore, Public Storage had an approximate 42% common equity interest in PS Business Parks, which owned and operated approximately 28 million rentable square feet of commercial space.

Investors receive a 2.17% distribution. The $375 Raymond James target price compares with the $370 consensus target for Public Storage stock. Monday’s closing share price was $368.80.

Redwood Trust

This is a very solid play for income investors looking for a reasonably safe vehicle. Redwood Trust Inc. (NYSE: RWT) operates as a specialty finance company in the United States. The company operates through three segments.
The Residential Lending segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans.

The Business Purpose Lending segment operates a platform that originates and acquires business purpose loans, such as single-family rental and bridge loans for subsequent securitization or transfer into its investment portfolio.

The Third-Party Investments segment invests in residential mortgage-backed securities issued by third parties, as well as in K-Series multifamily loan securitizations and SLST reperforming loan securitizations. This segment also offers servicer advance and other residential and multifamily credit investments.

The company qualifies as a REIT for federal income tax purposes, and it intends to distribute at least 90% of its taxable income as dividends to shareholders.

Shareholders pocket a 5.89% distribution. Raymond James has set a $16.50 price target. The $15.25 consensus is closer to Monday’s closing trade for Redwood Trust stock of $13.25 per share.

Valero Energy

This Wall Street favorite is a solid energy play for conservative investors looking for safer ideas. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.

Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Investors receive a 5.36% dividend. The Raymond James price target on Valero Energy stock is $95. The consensus target is $86.76, and shares were last seen trading at $73.13.

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While none of these stocks will soon be making any massive parabolic moves higher, they are safer ideas for nervous investors concerned about the potential for inflation to wreak havoc on the economy in 2022. Remember that REIT distributions can contain return of principal.

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