Tech investor Dan Niles gives his top 2022 picks and what he's betting against

Published Thu, Dec 23 202112:25 PM EST

Tech investor Dan Niles has low expectations for U.S. stocks overall next year, so he shared the ideas he's betting on — and against. "We're trying to deal with a portfolio where we think downside risk is large," the Satori Fund founder told CNBC's "TechCheck" on Thursday. Niles believes the equity market will be harder to play next year as the Federal Reserve tapers its pandemic-era asset purchases and looks to hike interest rates . For investors who want to own stocks despite the headwinds, Niles highlighted the growth-at-a-reasonable-price strategy that combines growth and value investing. The hedge fund manager likes Google-parent Alphabet, which he believes will benefit from an increase in travel and leisure in 2022. Niles also recommended Facebook-parent Meta . He thinks Meta's profit will be higher than forecasted next year, especially if the company's investments in the metaverse take off. "You can get a much better opportunity to buy a lot of the names you like a lot lower in the first part of next year," Niles said. Investors should also look at value sectors that were beat up in 2021 such as media, telecom and gaming, according to Niles. Value stocks trade at prices perceived to be relatively cheap for their returns. However, rising rates should hit high-growth names hard, Niles said. The investor predicts the benchmark 10-year Treasury note yield will surge above 2% in the first half of 2022 from its current level of about 1.4%. High-growth tech shares trade on the promise of big earnings down the line, but rising rates make those future potential cash flows less valuable. "The ones with high valuations, very little earnings — if you look at next year, that's really what's going to struggle," Niles said. "I think you need to be very careful of owning something … that's going to be profitable five to 10 years from now." Niles said his fund has a basket of shorts on those high-growth and currently unprofitable names, meaning he's betting those stocks will decrease in value. Outside of stocks, Niles said he is positive on cash next year as markets get tricky. "People underestimate the value of cash," Niles said.

Daniel Niles

John Chiala | CNBC

Tech investor Dan Niles has low expectations for U.S. stocks overall next year, so he shared the ideas he's betting on — and against.