- Longtime stock market bull Laszlo Birinyi says Wall Street’s new year predictions are usually wrong.
- Birinyi says the bull market should keep going even if expectations are low right now.
- He gathered a collection of stocks that are recommended by numerous firms for 2022.
New Years’ resolutions rarely stick, and annual stock market predictions don’t hold up much better, according to longtime investor Laszlo Birinyi.
Birinyi, founder and CEO of stock-market research firm Birinyi Associates, is known for being more bullish than most. That was true last year, when he was able to book a profit of almost 300% on a simple, optimistic trade, and it’s true in 2022 as well.
The general consensus this year is that investors shouldn’t expect stocks to deliver the big returns they did in 2021, when the S&P 500 index climbed 26.9%. Birinyi checked the 2022 outlooks of 19 major Wall Street firms, European banks, and independent sources, and concluded that they’re forecasting a gain of 4% on average.
The problem is that their track record is poor. The same 19 firms predicted a gain of about 8% last year, but Birinyi writes that since 2009, their annual forecasts have been off by more than 10% in an average year. If this year is typical, he suggests, there’s little reason to expect a protracted sell-off or meager returns.
“The concerns of today (valuation, inflation, FRB, etc.) have been with us in one form or another for the entirety of the last year and even longer,” he wrote. “The S&P remains in a strong uptrend and while we expect higher prices, we would not be surprised to see a slowing of the advance.”
The stock market tends to focus on events three to six months in the future and doesn’t really work on a yearly cycle, Birinyi says. But given the underwhelming outlooks flying around, he suggests that investors make a simple bet on higher than expected upside for stocks.
“This year we will be buying the SPYDER 12/16/22 $505 Call as a manifestation of our positive view,” he wrote. But he emphasizes that he’s not predicting the S&P 500 will finish the year at 5,050 — just that the call will make money. He also bought the SPYDER 6/30/22 $500 Put for insurance.
While he doesn’t think much of Wall Street’s predictions, Birinyi observed elements of consensus when it comes to specific stocks. Of the 19 outlooks he reviewed, he notes that four firms named chipmaker Nvidia (NVDA) and four picked Broadcom (AVGO) as top choices. Two firms each named Apple (AAPL), Micron Technologies (MU), and Marvell Technology (MRVL) as top choices.
He also searched more broadly and found stocks that numerous companies put on their “Buy” lists. The following 38 companies each appeared in two or more of those collections.
Stocks on two “Buy” lists
Utilities: NRG Energy
Real estate: Armada Hoffler Properties
Stocks on five “Buy” lists
Energy: Devon Energy