The stock market had a bad year in 2022. Even after dividends, the S&P 500 plummeted 19.4% in those 12 months, while the tech-heavy Nasdaq composite fell 33.1%.
The triggers for Wall Street’s sell-off are all too familiar: Inflation, skyrocketing interest rates, persisting recession fears, and the Russia-Ukraine war snowballed into an avalanche of worries that investors couldn’t ignore, and many previously high-flying companies suffered as the “risk off” mindset took hold.
Fortunately, this created a window of opportunity for investors to buy fantastic firms at a bargain when the new year began. Before each new year, U.S. News recommends ten stocks to invest in for the coming year.
Here is a list of the top ten best stocks to purchase in 2023, as well as how each has performed thus far in terms of total returns, which include dividends.
Apple Inc (AAPL)
If you remove government-backed behemoths like Saudi Aramco, Apple is the world’s largest publicly traded firm. Apple shares, like other IT firms, struggled in 2022 as recession fears and rising interest rates frightened investors in the sector.
With an unusual 26.4% drop in 2022, Apple currently trades at 25 times earnings, providing investors with an attractive entry position for the $2.4 trillion iPhone company.
Although its most recent profits report fell short of projections, this was due to supply chain inefficiencies rather than demand issues. Indeed, Apple reported an active installed base of over 2 billion devices, with revenue in its high-margin services division over $20 billion.
Apple stock has recovered from its 2022 difficulties, with shares up 16.1% in 2023 through February 9.
Dutch Bros Inc (BROS)
Enter the rapidly rising coffee chain Dutch Bros, which, although being worth more than $6 billion, is roughly 0.25% the size of Apple. Revenue is exploding, up 53% year over year in the most recent quarter.
With 671 sites in 14 states, Dutch Bros is virtually entirely in the West and Southwest, where it began on the West Coast. Because of the modest footprint of its drive-thru locations, they are relatively inexpensive to open, allowing for rapid expansion.
This is reflected in the numbers: Dutch Bros plans to open 133 additional stores by 2022, representing a 25% increase in site expansion.
To begin 2023, investors have flocked to BROS, which is the best-performing company among the 10 choices, with shares up 30% through Feb. 9.
Citigroup Inc (C)
Citigroup is a $100 billion international bank with retail and investment banking divisions. Citigroup provides two benefits to investors.
First, it pays a respectable 4% dividend yield, which is a nice cushion for shareholders in a period of increasing rates and high inflation.
Moreover, that dividend is sustainable over time, with Citigroup paying out less than 30% of earnings.
Apart from its hefty dividend, Citigroup appears to be a bargain company at the moment, trading at less than 8 times forward profits and 0.54 times book value.
Warren Buffett, the famed investor and financial expert, began purchasing Citigroup stock in the first quarter of 2022, with Berkshire Hathaway Inc. (BRK.A, BRK.B) owning around $2.8 billion in the business at the end of the third quarter. Citigroup stock is up 11.6% in 2023 as of February 9.
Amazon.com Inc (AMZN)
Amazon, the dominant internet retailer, was also chosen one of the ten best stocks to buy for 2023, following a disastrous 2022 in which shares lost 50% of their value.
Cost inflation, a tight labor market, supply chain issues, and diminishing consumer confidence were among the factors. Yet, the market was far too quick to dismiss Amazon, whose crown jewel is Amazon Web Services, its enormous, rapidly growing, and massively profitable cloud services subsidiary.
AWS’s yearly revenue run rate exceeds $85 billion. Given that Microsoft Corp. (MSFT) trades for about 10 times sales, placing the same multiple on AWS values it at $850 billion.
With Amazon’s current $1 trillion valuation, investors may purchase the rest of the company’s enormous activities – which had $434 billion in sales in 2022 – for around $150 billion. AMZN has been a terrific bet so far in 2023, with shares up 17% as of Feb. 9.
Walt Disney Co (DIS)
The management team of a firm is one of the most essential factors to consider when selecting stocks to buy and hold for the long term. Yet, with the recent return of veteran CEO Bob Iger, Disney now has plenty of that. Iger, widely regarded as one of the best CEOs this side of the millennium, presided over a string of massively successful acquisitions, including Pixar, Marvel Entertainment, and Lucasfilm, before handing over the CEO post to Bob Chapek in February 2020.
Disney just released its first earnings report since Iger’s return, a fiscal first quarter in which the company outperformed analysts on both earnings and revenue.
Following a price increase for its streaming service, Disney+, subscriber losses were lower than expected, but revenue from its theme parks increased by 21% in the quarter.
Iger’s enchantment has been on full display in 2023, with Disney shares up 27% year to date through February 9.
PayPal Holding Inc (PYPL)
PayPal, a time-tested and well-run financial business, is trading for less than it did before the epidemic, despite earnings per share of $4.13 in 2022 – higher than any year between 2018 and 2020.
Shares fell 62% in 2022 as a result of a deteriorating macro environment and the loss of its lucrative association with eBay Inc. (EBAY). Despite a five-year average price-earnings ratio of 36.5, shares are now trading for around 20 times estimated 2023 earnings.
PayPal’s lowest P/E ratio between 2015 and 2021 was 20.3. Applying that cautious multiple to the average predicted 2023 earnings of $4.75 results in a price of $96.43 per share by early 2024, representing a 23% increase from the closing on February 9.
Newly announced agreements with Apple Pay to accept PayPal- and Venmo-branded cards could increase PayPal’s footprint in brick-and-mortar shopping, while Amazon now takes Venmo, providing PayPal access to its massive online marketplace.
PYPL stock is up 10.1% in 2023 as of February 9.
EOG Resources Inc (EOG)
EOG, a return pick from last year’s best stocks to buy list, is a U.S. oil and gas producer coming off a spectacular 2022 in which shares returned 56.3% in total. Yet, shares are still priced like a value company, trading at around 10 times earnings and 9 times forward earnings.
The red-hot energy market is unlikely to surge like it did in the inflation- and war-plagued year of 2022, but investors should not overlook the importance of an inflation hedge in their portfolios.
EOG has some credibility with income investors thanks to its 2.6% dividend yield and exceptionally low payout ratio of less than 24%. While inflation fears faded in the early months of 2023, EOG shares just treaded water, losing 1.2% year to date as of Feb. 9.
Grupo Aeroportuario del Sureste SAB de CV (ASR)
ASR also provides geographic diversification and is a mid-cap company that isn’t on the radar of most investors. In 2022, the stock was a gem in the rough, with a total return of 17% in a bad market.
Of course, it helped that passenger travel returned with a vengeance this year: passenger traffic increased 29.8% year over year in January 2023, driven by a 33.6% increase in Mexico and a 37.8% increase in Puerto Rico.
Airport operators profit from airline gate rentals and landing fees, as well as parking, ground transportation, airport retail, and advertising, among other things. Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia are ASR’s busiest airports. The stock pays a 2.9% dividend and is up 15.2% in 2023 as of Feb. 9.
Taiwan Semiconductor Manufacturing Co. Ltd (TSM)
Next on the list is Taiwan Semiconductor Manufacturing, a $500 billion company that is the preeminent high-level foundry for sophisticated semiconductors.
Foundries are companies that make chips for other companies in the semiconductor industry, and TSM has a huge market share for semiconductors 7 nanometers and smaller.
TSM’s largest customer is Apple, which has begun to shift its supply chain away from China.
The company’s fourth-quarter results exceeded both top- and bottom-line projections, with sales increasing by 43% and earnings per share increasing by 78%. TSM, which trades at just 14 times earnings and pays a 1.9% dividend, is another Buffett holding, and its shares have been crushing it in early 2023, gaining 29.8% through Feb. 9.
Diageo PLC (DEO)
Diageo is a $100 billion beverage conglomerate established in the United Kingdom. Diageo, a consumer defensive stock, should be able to withstand a stressed macro environment, given alcohol is highly recession-resistant.
Alcohol customers, like cigarette consumers, have a high level of brand loyalty, and the company’s roster of premier brands offers it an ideal position in its industry, with Johnnie Walker, Guinness, Tanqueray, Don Julio, Smirnoff, Baileys, Ciroc, and Bulleit all under its roof.
Despite a 21.4% increase in net revenues in fiscal 2022, the stock sank 17.4% with the market last year. This is partly due to its origins in the United Kingdom and a poor year for the British pound.
That decline cannot endure forever, and shares are already trading at 21.5 times expected earnings, a discount to the company’s five-year average forward P/E of 24.4. So far, the defensive DEO has failed in 2023’s rah-rah market, falling 3.3% through Feb. 9.
Conclusion
The year 2022 was not a good year for the stock market, and the sell-off was triggered by familiar causes like inflation, interest rates, recession fears, and geopolitical issues. However, the new year brought an opportunity for investors to purchase fantastic firms at a bargain. The ten stocks that U.S. News recommends for 2023 are Apple, Dutch Bros, Citigroup, Amazon, Walt Disney, PayPal, Fiverr, Alphabet, Accenture, and Visa. Among the ten companies, Dutch Bros has performed the best in 2023 so far, with shares up 30% as of February 9, followed by Walt Disney, up 27%. These companies are worth considering for those looking for a profitable investment.
___
Please continue to read new articles here about merchandise assessed by Waytrade.
