The year 2020 brought the biggest global crisis in 11 years, as the pandemic created a global lockdown. Airlines, oil, restaurants, retail, and tourism were some of the hardest-hit sectors. This year brought recovery, but in waves as the population gets vaccinated. Next year could see steady growth as a large chunk of the population is vaccinated and economies operate without stimulus.
Buying into the 2022 market
Do you remember the 2008-2008 Financial Crisis? After a V-shaped recovery between September 2008 and September 2009, the growth was tepid until August 2010. But the stock market saw another steep rise from September 2010 to April 2011, as the world overcame the crisis and went back to normalcy.
The year 2022 could bring 2010-11-like growth, as many recovery stocks return to growth. I have identified four stocks that could see a steep jump, as a stable economic recovery kickstarts their operations in full swing.
Transat stock
Many of you may have delayed your vacations for two years and are still skeptical, with all the uncertainty around virus spread. But you hope to make up for it next year with a long exotic vacation. Many people have similar plans. This pent-up demand will prove beneficial for international holiday tour operator Transat (TSX: TRZ). Transat is past the acquisition uncertainty and is preparing to get back to its feet with a $700 million bailout.
If you look at Transat’s history, the stock has shown bouts of growth happen after May. It has been 13 years since the 2008 crisis, and Transat has shown cyclical growth in five years. The growth cycle lasts for around six months, and the stock surges over 80% during this time. It is quite late for growth this year. But I expect to see a growth cycle in 2022.
Air Canada stock
I have similar expectations with Air Canada (TSX: AC). After the government bailout in April, the stock has hit a plateau. The bailout gives the government a 10% stake in AC that dilutes shareholders’ interest. Air Canada understands that and is trying to avoid using the bailout money as much as possible. But for that, the airline needs the ticket money. Alternative revenue sources like air cargo and Aeroplan loyalty cannot make up for the ticket money.
The Canadian government is finally easing travel restrictions for foreign travellers. If this gradual easing continues, travellers will return. AC can get the cash it needs to run the operations, and the management can avoid using bailout money to save shareholder interest. Air Canada had already anticipated a pandemic recovery in three years, and 2022 could see significant recovery growth of around 40-50%.
Suncor stock
Suncor Energy (TSX: SU)(NYSE: SU) stock is likely to move in tandem with airline stocks, as the pent-up travel demand will drive oil prices. I do not expect Suncor stock to reach its pre-pandemic level of over $40, as it did not ever reach its 2008 level after the financial crisis.
Suncor is entering a phase where oil sands projects might not be as profitable as they used to be, given the large investment in controlling carbon emission. Suncor and other oil companies have proposed a $75 billion plan to achieve net-zero emissions by 2050. This investment might impact its profits. Hence, I do not expect the stock to reach the pre-pandemic levels. Warren Buffett probably saw this coming and exited his position in Suncor at the stock’s June peak. But I do expect the stock to surge 25% and reach its June high of $30. Hence, I recommend buying it ahead of 2022.
Magna stock
Magna International (TSX: MG)(NYSE: MGA) stock has dipped 20% from its June high, as the semiconductor supply shortage delayed its recovery. The company supplies auto components and auto manufacturing services. It saw a return in demand for lightweight vehicles this year, but the chip shortage has limited the auto industry’s growth.
Magna expects the semiconductor situation to improve by 2022, and that is when the growth could resume. In the meantime, Magna is building factories and looking for strategic acquisitions and partnerships to tap the growth next year. Magna will ride the electric vehicle wave, presenting a significant growth opportunity for those who wait.
