Investors should keep an eye out for casino and real estate stocks next year, according to Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber.
MGM (MGM), Lennar (LEN), and Tesla (TSLA) were selected as the top three stocks poised to rise in 2022 in Gerber’s preview. He joined Yahoo Finance Live on Thursday to discuss which stocks should perform best next year.
“MGM is a long-term holding of ours and we've been adding to it on the weakness because of Omicron,” Gerber said. “And we absolutely believe this is the endgame for Corona, this winter being sort of one of the tougher winters again. But as each winter rolls on, this will become much more normal and much less disruptive.”
MGM Resorts International, a giant in the hospitality and entertainment industry, specializes in casinos, hotels, and resorts. As the global outlook continues to improve and the economy adjusts to the new realities concerning COVID, Gerber noted, the hospitality sector could stand to benefit greatly.
The prospect of interest rate hikes in 2022 looms over the economic picture for next year and has dampened some analysts’ expectations for stock market growth. “The probability of a 10% correction in the near term or over the next 12 months is elevated,” Bank of America’s (BAC) U.S. stock and quantitative strategy chief Savita Subramanian told Bloomberg earlier this month.
Gerber, who expressed doubt that all three Fed rate hikes would come in 2022, had a more optimistic disposition.
“We actually don't think the Fed will actually hit their three rate hikes next year, we'll see,” he said. “But if it does happen, it won't be till the end of the year, and so housing is a supply and demand imbalance on a massive scale. And home builders like Lennar, especially Lennar, which is a really large, established home builder in multiple regions, are just benefiting from this enormous demand. So every house they're building, the profits just go up every month because prices keep going up.”
Lennar, a Florida-based home construction company, has suffered recently from supply chain disruptions related to the pandemic. However, industry experts expect many of these challenges within the housing market to be overcome next year. Research and Markets reported that the U.S. construction industry is expected to grow by 3.7% in 2022.
Throughout most of the year, the housing market has remained hot. Similar to other industries, like electronics, housing has faced supply bottlenecks and labor shortages which have restricted supply in the face of rising demand. The Federal Housing Finance Agency reported that housing prices grew 18.5% through 2021 Q3 compared to a year ago, culminating in the largest annual increase in the agency’s House Price Index.
Tesla was Gerber’s last recommendation, and his number one pick for investors in 2022. He had some bold predictions for the EV maker in his interview with Yahoo Finance Live.
“I think over the next decade, Tesla will be the most consequential company in the history of business,” Gerber said. “I think in 12 months, we're going to see amazing breakthroughs in AI and technology. And what Elon has done yet, we don't know, you want to own stock in this future. So with robotics, AI, and the dominance in the EV and climate space, Tesla is the best stock of all time.”
Tesla certainly rewarded bullish investors in 2021. This year, Tesla stock has gained 56%, more than double the S&P 500’s 27% rise.
Even so, challenges remain. The company recalled nearly half a million of its Model 3 and Model S over safety issues concerning the cars’ rear view cameras and trunk. Industry experts have raised concerns regarding the sustainability of Tesla’s high market share in the EV market, as well as the possible emergence of competitors.
Gerber cautioned investors not to be too concerned about the recalls. Recalls are relatively normal for car companies, and Tesla’s main strengths lay outside of their automobile services, anyway, he added.
“Tesla is a better AI technology company than a car company, as we've all learned over the last 10 years,” he said. “They build cars, but they're basically building an iPhone on wheels. And so the entire infrastructure that they've been building around service, for example, has been a big challenge for them. They've innovated some amazing things like mobile service.”
Overall, stocks stayed flat on the final trading day of 2021, giving this year’s Santa Claus Rally a rather muted finish. The S&P 500 reached an intraday high Thursday but fell in the afternoon. This year, the index reached a record high every month, a feat achieved only once before, in 2014.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.