Half of 2022 has already passed, and many investors are reviewing their portfolios to see how to position them for the years ahead.
With a bear market in both the S&P 500 and NASDAQ Composite Indices, it’s understandable to feel pessimistic.
Warren Buffett chimes in here with his wise words – be greedy when others are fearful.
And that is exactly what you should be doing as worries over a recession and high inflation dominate the headlines.
If you lengthen your time horizon considerably, then all these troubles will eventually pass, leaving you holding on to solid businesses that can not only recover but go on to grow steadily.
Here are four stocks you may wish to consider adding to your investment watchlist.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a pure-play Singapore suburban retail REIT with a portfolio of nine malls.
The malls are well-connected to MRT stations and enjoy high recurring shopper traffic as they serve mainly heartlanders living in HDB estates.
More than half of FCT’s gross rental income (GRI) is tagged to essential services, which are more resilient during a downturn.
Shopper traffic hit 73% of pre-COVID levels in April, but tenant sales have exceeded the pre-pandemic levels by 12%.
This statistic shows that people are spending more per trip and bodes well for the REIT.
FCT’s gross revenue and net property income (NPI) have increased by 1.5% and 3.8% year on year, respectively.
Distribution per unit (DPU) has inched up 2.3% year on year to S$0.06136.
The retail REIT’s aggregate leverage stood at 33.3% as of 31 March 2022, providing sufficient debt capacity for the REIT to conduct more acquisitions.
Digital Core REIT (SGX: DCRU)
Digital Core REIT, or DCR, owns a portfolio of 10 data centres valued at around US$1.46 billion.
All its properties are fully occupied with a weighted average lease expiry of 5.5 years.
For the first quarter of 2022 (1Q2022), DCR’s distributable income came in at US$12.1 million, 1.9% above its forecast.
Back when DCR was first listed, it offered a 4.75% distribution yield at its IPO price of US$0.88.
The REIT’s units have since tumbled to a 52-week low, bringing its prospective distribution yield to 5.5%.
With aggregate leverage of 26% and a low cost of debt of 2.1%, the REIT is well-positioned for acquisitions that can help boost its DPU.
Its sponsor, Digital Realty Trust (NYSE: DLR) is a US$37.4 billion data centre REIT with more than 290 data centres within its portfolio.
DCR has identified around US$500 million to US$1 billion worth of acquisitions from a pipeline of US$15 billion.
Nike (NYSE: NKE)
Nike is one of the largest sports apparel and footwear retailers in the world.
The US$159 billion company is known for its innovative footwear that’s worn by world-class athletes.
Nike recently announced a creditable set of earnings for its fiscal year ended 31 May 2022.
Revenue was up 5% year on year to US$46.7 billion while net income increased by 6% year on year to US$6 billion.
The company is currently trading close to its 52-week low of US$99.50 as it took a US$150 million charge related to its decision to exit Russia due to the Russian-Ukraine conflict.
Demand remained firm for Nike’s products as affluent customers continued spending on higher-priced products.
The company’s board also authorised a new four-year, US$18 billion share buyback plan.
DBS Group (SGX: D05)
DBS Group needs no introduction, being the largest bank in Singapore.
The lender reported its second-highest net profit on record despite seeing a 10% year on year decline in net profit for its 1Q2022 earnings.
The group is trading close to its 52-week low of S$29.18 as investors remain bearish on the economy.
One tailwind that DBS should enjoy is rising interest rates.
Higher rates should result in an improvement in the bank’s net interest margin, which in turn will lift its net interest income.
DBS has estimated that every rise of one percentage point in the Federal Funds Rate will increase its net interest income by S$1.9 billion, or more than one-fifth of its total FY2021 net interest income.
Thus far, the US Federal Reserve has hiked interest rates by 0.75 per cent and looks poised to continue raising rates at its policy meeting later this month.
Let’s not forget that the bank has also acquired Citigroup’s (NYSE: C) Taiwan consumer banking business for around US$2.2 billion, helping to further boost its Asian franchise.
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Disclaimer: Royston Yang owns shares of DBS Group, Digital Core REIT and Nike.
