Top Australian stocks in 2022: zooming in on the island continent
The economic and social implications of Covid-19 have been felt worldwide. Even countries like Australia, which are geographically separate from the rest of the world, continue to feel the effects of the pandemic that first made its appearance toward the end of the first quarter in 2020. Read on to discover the latest trends in Australian share prices and find out more about some of the best and worst Australian companies.
Tracking the Australian economy
According to data released by the Australian Bureau of Statistics (ABS), Australia’s gross domestic product (GDP) fell by 1.1% between December 2019 and December 2020. Its latest release, published on 1 December 2021, reveals that GDP fell by 1.9% between June and September 2021. This contrasts sharply with the 3.4% growth recorded in the same period a year ago, when the economy was showing signs of recovery after a devastating second wave of the pandemic.
Sean Crick, the acting head of National Accounts at the ABS, said that domestic demand in the third quarter of 2021 had fallen back due to the prolonged lockdowns GDP in the three months to September 2021 was just 0.2% below pre-pandemic levels recorded in the December 2019 to March 2020 quarter.
There is a reason for optimism in the latest retail turnover figures, however. Data shows sales increased by 4.9% in October, a significant jump from the 1.3% rise in September 2021. According to Ben James, director of Quarterly Economy Wide Statistics, retail performance continues to be tied to state lockdowns, with the 4.9% increase being linked to the end of the four-month long lockdown period on 11 October 2021.
Stock market view
The S&P ASX/200, which tracks the performance of Australia’s 200 largest companies, is considered the benchmark index for the AU stock market.
On 15 December 2021, the index closed at AUD7,327. This represents a 1.27% month-to-date increase on the 1 December price of AUD7,235 and a 0.63% uptick from the quarter-to-date price of AUD7,332.16.
The index, which represents a significant chunk of the Australian economy, has shown double-digit growth of 9.62% year-to-date climbing from AUD6,684 at the start of the year.
Ned Bell, the chief investment officer, at Bell Asset Management recently shared his 2022 outlook for Australia stock list. He mentioned that for developed nations such as Australia, robust consumer spending has really played out. He still expects share markets such as the Australian Securities Exchange (ASX) 200 to offer lower returns as global GDP growth drops to 4.5% or even lower in 2022 .
His pessimistic outlook for stocks trading in Australia in 2022 is driven by China’s quarterly GDP fall to 4.9% in the third quarter of 2021, from 7.9% in Q2 2021. Considering the significant role China plays in the global economy, any fallback on its growth owing to its property crisis will have a spillover effect on Australian markets as well.
However, the magnitude of this effect remains to be seen into the next year.
5 Australian stocks to watch out for in 2022
According to the data compiled by CompaniesMarketCap.com, the following are some of the biggest companies in Australia as of 15 December 2021 at 12.15 GMT, based on the market capitalisation metrics.
BHP Group
Headquartered in Melbourne, this Anglo-Australian multinational mining, metals and petroleum giant has a primary listing on the ASX. Additionally, the BHP Group’s American depository receipts (ADRs) trade on the New York Stock Exchange (NYSE). Its other parent company, BHP Group, trades on the London Stock Exchange (LSE).
On 2 December 2021, the company announced its plan to end its UK-listed public limited company (PLC) shares and unify BHP’s corporate structure under its Australian parent company. Investors welcomed this decision and the stock closed at 40.20 AUD a day after, at a record high since September.
As of 20 December 2021, BHP was trading at 41.10 AUD on the ASX. It’s currently trending at a one-month high, rallying 3.82 points or 10.20% higher, from 15 November 2021 close price of 37.46 AUD.
The analyst team at Morgans has an add rating and a 45.70 AUD price target on the company’s shares. Additionally, analysts at Macquarie have given the stock a buy/outperform rating and a price target of 51 AUD.
Commonwealth Bank
Considered to be one of the ‘big four’ Australian banks, Commonwealth Bank of Australia or Comm Bank has been trading on the ASX since 1991 and remains one of the biggest in Australia index stocks. It traces its origin back to 1911, established by the Australian government and fully privatised in 1996.
On 17 November 2021, with the company’s Q3 2021 results out, the stock plummeted by 8.07%. While this major bank has outperformed its rivals in the past years, its latest quarterly results hurt investor sentiment by reporting a considerably lower net interest margin (NIM). The company attributed its lower NIM results to a low-interest-rate environment and high competition in its key home loan markets.
The chief investment officer of Atlas Fund Management, Hugh Dive, said that the 8% fall is an overreaction by the market and this unaudited quarterly update isn’t something to worry about. However, despite a strong operational performance otherwise, Goldman Sachs retained a ‘sell’ recommendation on CBA and reduced its PT to 81.74 AUD. Bell Porter still regards the stock as a ‘buy’ but has cut its price forecast to 101 AUD. At the time of writing (20 December) the stock was trading at 96.93 AUD.
CSL
Commonwealth Serum Laboratories is an Australian-origin, multinational biotechnology company. Listed on the ASX since 1994, it has since acquired multiple companies, including Aventis Behring (now known as CSL Behring), Seqirus, Calimmune and more.
CSL is one of the priciest stocks in Australia, and its purchase of Vifor has seemingly further boosted analyst ratings of it. According to Refinitiv Eikon data, seven of 12 analysts now rate the CSL stock ‘Buy’, while five have a ‘Hold’, with the median price target of $327.85, indicating a 10.28% upside last close price of 297.27 AUD.
Jefferies has lifted its price target on CSL to 343.70 AUD from the earlier 338 AUD, while maintaining a ‘buy’ rating. Citi has upgraded its rating to ‘buy’ from ‘neutral’ and increased its price target to 340 AUD from 325 AUD.
Alongside the stocks with high market capitalisations that have seen good gains in the past few years, there have been those that have not performed as well.
Mesoblast
A regenerative medicine company, Mesoblast, uses its proprietary technology platform to develop and commercialise innovative allogeneic cellular medicines to treat complex diseases.
For the quarter ended 30 September 2021, the company posted its first-quarter result for the financial year 2022 on 24 November 2021. It reported total revenue of $3.6m, year-on-year revenue growth of approximately $2.3m from the 2020 figure of $1.3m. The loss after tax (LAT) figure for 2021 stood at $22.7m, a $1.8m improvement over last year’s LAT of $24.5m.
A day into the company’s Q1 2022 financial results announcement, the stock price rallied by 1.73%. However, the company has had a tough year overall.
Since the start of this year, the stock has plummeted by 41%. When compared to its historical five-year stock price of 1.46 AUD on 3 January 2017, the stock has fallen by 6.84%, to its last close of 1.36 AUD on 20 December 2021.
In November 2020, Novartis, the pharmaceutical giant had agreed to sign a deal with Mesoblast in a combined effort to develop Covid-19 treatment. The latter was going to earn $50m from this deal, inclusive of $25m as equity investment as agreed by Novartis. However, this deal has now been called off by Novartis.
In recent times, this is how different research analysts have commented on Mesoblast stock. Zacks downgraded Mesoblast from a ‘buy’ to ‘hold’ rating, whereas Chardan Capital cut their price target to $6.50 from $7.50 and recommended a ‘sell’.
D.Stanton, Jefferies Financial Group analyst has a ‘hold’ rating on the stock and expects the company to post an EPS of $0.70 for FY 2023.
Bionomics
A clinical-stage biopharmaceutical company, Bionomics focuses on developing a pipeline of novel therapeutic ion channel targeting drug candidates in order to better the lives of patients suffering from Central Nervous System disorders. Their mission is to provide for the high unmet medical needs of such patients.
On 29 October 2021, the company published its annual report for the financial year ended 30 June 2021. During the previous year, the company sold off its two wholly-owned French subsidiaries, which were responsible for their contract service business. The loss from these discontinued operations resulted in approximately $8.6m for the year ending 30 June 2021. For the year ending 30 June 2020, the company’s overall loss was reported at $7.1m.
Basic loss per share remained unchanged at $0.01 from continuing and discontinued operations, across 2020 and 2021.
The company’s executive chairman, Errol De Souza, called 2021 one of the most significant years in Bionomics’ history.
On 13 December 2021, the company announced the launch of its IPO in the United States, by way of 1.622 million American Depository Shares, representing 180 ordinary shares. The company made its debut on the NASDAQ on 16 December under the ticker ‘BNOX’.
At its current trading price 0.12 AUD at ASX, the stock price has pulled down by 25% this quarter; it was trading at 0.16 AUD on 1 October 2021. It remains 7.69% lower than its start of year trading price of 0.13 AUD.
Algorithm-based forecasting service Wallet Investor does not offer a Bionomics stock prediction beyond December 2022. According to its forecast, the BNO price could drop as low as $0.05 by December 2022. This restricts a credible BNO share price forecast at this time.
When considering whether to invest in the company’s stock, you should always do your own research, considering the outlook and relevant market conditions. A number of factors dictate whether stock prices rise or fall, including the company’s fundamentals and broader macro-economic factors. Past performance is not a guarantee of future performance. Markets are volatile. You should conduct your own analysis, taking in such things as the environment in which you are trading and your risk tolerance. And never invest money that you cannot afford to lose.
FAQs
What are the largest Australian companies?
As per market capitalisation as of 20 December 2021, the five largest Australian companies are BHP Group, Commonwealth Bank, Macquarie, Transurban and CSL according to CompaniesMarketCap.com.
What is S&P/ASX 200?
Managed by Standards & Poor’s, Australian Securities Exchange is recognised as the institutional investable benchmark in Australia. It is designed to measure the performance of the top 200 largest companies of Australia, and uses float-adjusted market capitalisation.