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(Alliance News) - Lender Lloyds Banking Group PLC and miner Anglo American PLC are among Hargreaves Lansdown's stocks to watch next year, analysts at the wealth management platform said on Tuesday, with commodity prices still on the rise and interest rate lift-offs potentially on the way too.
Hargreaves Lansdown tipped Polar Capital Holdings PLC for the "tech bulls", predicted a "sweeter future" for Tate & Lyle PLC and a rosier picture for medical device maker Smith & Nephew PLC.
Anglo American shares were 1.1% higher on Tuesday, Lloyds was up 2.0%, Tate & Lyle up 0.5%, Smith & Nephew up 0.4%, and Polar Capital was down 0.8%.
Miner Anglo American has benefited from ballooning commodity prices as economies re-opened from lockdowns, Hargreaves Lansdown analyst Susannah Streeter said. The stock is up 20% so far in 2021.
"Rises in iron, rhodium and copper all fed into record profits at Anglo's half year mark, and if they remain elevated in 2022, Anglo's profits should reap the benefits," Streeter added.
A worry for miners would be commodity prices declining, "what goes up, can come down", Streeter said, citing the example of iron ore prices.
However, Anglo American's diversified income stream should provide some shelter should prices of one commodity decline, Streeter added.
While commodity prices benefited from an expansion of the economy, interest rates may be the next thing to rise as central bankers taper tighten monetary policy.
The Hargreaves Lansdown analyst added that an interest rate lift off could particularly benefit Lloyds, as it relies more on traditional lending than some of its peers.
"But if interest rates remain lower for longer, Lloyds is likely to struggle to improve profitability," Streeter said.
Lloyds has the potential to implement cost savings, however. It has one of the largest UK branch networks. An increasing shift to online banking has seen some high street banks close branches.
"Spades of excess capital, possible interest rate rises and opportunities for growth are a tempting mix," Streeter said of Lloyds. The stock is up 24% in 2021.
A boom in tech shares has been a common theme during the pandemic, and should this continue, investors could be tempted by investor Polar Capital, the Hargreaves Lansdown analyst explained.
With a tech-focused portfolio, the AIM listing could be useful for those that want exposure to the sector but would prefer to be spared company-specific issues.
Rising interest rates could be a threat, however, Streeter said. Polar Capital shares are up 8.1% in the year so far.
Back among London's large-caps, Streeter said Smith & Nephew has the ability to "stage an impressive recovery in the year ahead". The stock has fallen by 19% in 2021.
All three of the company's units have been hit by the pandemic, which has lowered the number of elective surgeries.
"While it's been hampered by supply chain issues, the picture is looking brighter now some of the problems have eased. There's significant opportunity in the group's Sports Medicine and Orthopaedics businesses as demand appears just to have been delayed, rather than having evaporated which could bode well for the year ahead. If the pandemic recedes in 2022, Smith & Nephew, with its new leaner cost base, should be able to capitalise from the backlog of elective surgeries postponed in 2020 flooding the market," the Hargreaves Lansdown analyst said.
Finally, Streeter tipped Tate & Lyle to benefit from selling a stake in its Primary Products arm in North and South America.
In July, the food ingredients company agreed to sell a controlling stake in a new company and its subsidiaries, comprising its Primary Products business in North America and Latin America and its interests in the Almidones Mexicanos SA de CV and DuPont Tate & Lyle Bio-Products Co LLC joint ventures.
The assets are to be sold to KPS Capital Partners LP. Tate & Lyle said it expects to receive gross cash proceeds of USD1.3 billion.
"This is easily the least profitable part of the business," Streeter said.
"Recovery stocks are risky – and this is no exception. However, following the disposal management should be firmly focused on the most attractive parts of the business and strategy could deliver an appetising return."
Tate & Lyle said it intends to return GBP500 million to shareholders as a special dividend following the stake sale. Completion is expected in the first quarter of 2022.
Tate & Lyle shares are down 3.2% in 2021.
By Eric Cunha; ericcunha@alliancenews.com
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