We are in some strange times here at the dawn of 2022. The pandemic is not over after two long years and counting. But the generous government stimulus that has walked hand in hand with the pandemic looks to be winding up. That makes investing in ASX shares all the more difficult in these strange times.
The past two years have been an interesting time to invest. We've seen travel shares fall and rise, and tech shares rise and fall. So how does one position an investment portfolio in 2022? Is it finally time to let go of some COVID losers (or winners)? Let's see what some investing experts reckon.
Elston Asset Management's Bruce Williams and Investors Mutual Limited's Simon Conn recently joined LiveWire for a 'Buy Hold Sell' interview. Let's see how these investing experts are gauging the year ahead for ASX shares.
So both experts agree that we might continue to see some heightened volatility throughout the year as stimulus ends and central banks around the world look to start raising interest rates. Mr Williams says that we are looking at a "pretty volatile period" which will "change the expectations for not only companies but what we pay for them as well".
Mr Conn agrees, stating that we might see a "big valuation adjustment" as interest and bond rates rise, particularly among high-growth ASX shares with stretched valuations.
ASX experts: Out with ASX retail shares, in with energy and consumer staples
Williams is also avoiding consumer discretionary shares, particularly those in the retail sector:
They've had a period of unbelievable demand because we'd had no other choice… In our view, it meant these companies are actually over-earning… And it's really difficult to work out what underlying demand will be going forward.
Mr Conn agrees, saying that retail shares' margins are "looking a bit inflated" and that the "valuations don't reflect more normal underlying running conditions for a lot of the companies in that sector."
Instead, both Mr Williams and Mr Conn are looking to other parts of the market in 2022, especially the consumer staple and communications sectors. Mr Conn names these ASX shares as having resilient demand, pricing power and current valuation. He likes Bega Cheese Ltd (ASX: BGA) right now, as well as TPG Telecom Ltd (ASX: TPG) and Telstra Corporation Ltd (ASX: TLS).
Meanwhile, Mr Williams is eyeing off energy and healthcare shares. He names Santos Ltd (ASX: STO) as a potential winner going forward, noting its "discipline" and strong balance sheet. For healthcare shares, Williams likes Ramsay Health Care Limited (ASX: RHC) for its long-term growth prospects.
So that's how these two investing experts are positioning their ASX share portfolios in 2022. It's certainly a plan for a different world to the one we've been living in over the past 2 years.
