JPMorgan picks best short strategy candidates for 2022: At the Open
Dec. 10, 2021 7:06 AM ETQuidelOrtho Corporation (QDEL), KMB, DE, JBHTSPY, SP500By: Kim Khan, SA News Editor13 Comments
- In its Stocks for Every Strategy 2022 report, JPMorgan's North American Equity Research team identifies four stocks to short across a variety of sectors.
- Overall, JPMorgan is looking for a rise in the broader market through next year.
- "Next year, we expect S&P 500 (SP500) (NYSEARCA:SPY) to reach 5,050 on continued robust earnings growth as labor market recovery continues, consumers remain flush with cash, supply chain issues ease, and inventory cycle accelerates off of historical lows," chief equity strategist Dubravko Lakos-Bujas says. "Most of the equity upside should be realized between now and 1H22 when monetary and fiscal policy tailwinds will be strongest, followed by sideways action in 2H22 (the Fed liftoff could drive some de-risking and intra-cycle correction)."
- The short ideas are:
- Deere (NYSE:DE), rating Underweight
- "Strong agriculture fundamentals combined with elevated U.S. government direct payments have translated into robust demand for agriculture equipment in 2021, and supply constraints are extending demand into 2022," machinery, engineering and construction analyst Ann Duignan writes. "However, increasing global crop production and rising farm input costs will likely challenge U.S. farmer economics/sentiment in 2022, which could represent the peak of the cycle for equipment purchases."
- J.B. Hunt (NASDAQ:JBHT), rating Underweight
- "There is some risk to rail service disruptions if the federal contractor vaccine mandate impacts rail fluidity, which would also weigh on JBI at a time when freight rates are starting to show signs of weaker spot market activity by mid-2022," airfreight and surface transportation analyst Brian P. Ossenbeck says. "Ultimately, valuation at record levels versus truckload carrier stocks and increasing capacity across the intermodal group do not provide much margin of safety, in our view."
- "Ultimately, valuation at record levels versus truckload carrier stocks and increasing capacity across the intermodal group do not provide much margin of safety, in our view."
- Kimberly-Clark (NYSE:KMB), rating Underweight
- "We remain cautious on KMB shares heading into 2022 as we think visibility on underlying demand still remains quite limited in Consumer Tissue (~35% of sales in 2020) and the recovery in KC Professional (away-from-home) continues to track at a slower than expected pace," beverages, household products and personal care analyst Andrea Teixeira writes. "When we layer on the meaningful cost pressures from elevated commodity, labor and transportation costs (all of which are set to drive significant margin contraction in 2021), we think earnings growth in 2022 is likely to come in below current consensus forecasts."
- Quidel (NASDAQ:QDEL), rating Underweight
- "While we acknowledge the recent resurgence in COVID-19 testing and government contracts that have lifted QDEL’s results, we continue to question the long-term viability of antigen testing as competition remains intense, paired with broader vaccine roll-out," life sciences tools and diagnostics analyst Tycho Peterson says. "Additionally, we remain concerned about potential market share loss in the base business from larger Dx players increasing focus in the infectious disease testing market as a result of COVID."
- Screen for stocks with high short interest.