When investors cross the proverbial finish line for 2022 in less than two and a half months, they’re likely to look back on this year as one of the most challenging in history. The widely followed Dow Jones Industrial Average, benchmark S&P 500, and growth stock-driven Nasdaq Composite have all spiraled into a bear market, with these respective indexes falling between 22% and 38% at their peaks.
For many, significant market downturns can tug at their emotions and test their resolve to remain invested. But history is quite clear that putting money to work during bear market declines is a smart move. Eventually, every notable correction and bear market throughout history has been left to eat the dust of a bull market rally. This means 2023 could represent a fresh start for long-term investors and is all the more reason to do some shopping.
What follows are seven top stocks that have the catalysts and intangibles needed to make you richer in 2023.
Image source: Getty Images.
1. Meta Platforms
First up is the world’s leading social media stock, Meta Platforms (META 1.29%). Despite having a miserable year, the concerns about Meta’s ad revenue and spending on the metaverse appear overblown, which sets the company up nicely for a solid bounce in 2023.
Meta is the parent of four of the most-visited social media assets on the planet (Facebook, Instagram, WhatsApp, and Facebook Messenger). In the June-ended quarter, 3.65 billion people worldwide visited at least one of these sites each month. That’s more than half the world’s adult population. Even in the face of a difficult economic environment domestically and internationally, Meta’s monthly active user count has continued to grow. Advertisers are well aware that there’s no platform on the planet that gives them a better chance to reach audiences with their message than Meta-owned assets.
The other thing to consider is that Meta has the liberty to spend aggressively on the metaverse thanks to the $40.5 billion in cash, cash equivalents, and marketable securities on its balance sheet, as well as the $58.5 billion it generated in operating cash flow over the trailing-12-month (TTM) period. The metaverse may be a multitrillion dollar opportunity, and Meta would like to position itself as a key on-ramp. This is a company that can easily afford to spend on high-growth initiatives while remaining highly profitable.
Sustainably higher oil prices should encourage new drilling projects and lift demand for midstream operators. WTI Crude Oil Spot Price data by YCharts.
2. Enterprise Products Partners
A second top stock that can make you richer in the upcoming year is oil and gas company Enterprise Products Partners (EPD 0.67%). Enterprise pays a whopper of a dividend (7.5%), and it’s boosted its base annual payout for 24 consecutive years.
While some of you might be worried about investing in oil stocks as chatter about a U.S. recession swirls, Enterprise Products Partners can sidestep these concerns. That’s because it’s a midstream operator. It controls more than 50,000 miles of transmission pipeline, two dozen natural gas processing facilities, and can store 14 billion cubic feet of natural gas. Midstream operators lean on fixed-fee or volume-based contracts, which makes their operating cash flow quite predictable, no matter how volatile oil and natural spot prices are.
Additionally, the global energy complex is broken — or at the very best impaired. Capital investments were significantly reduced during the recession, and Russia’s invasion of Ukraine has compromised oil and gas supply to parts of Europe. With no immediate global supply fix, energy commodity prices should remain above average. This is likely to encourage domestic drilling, which is a boon for midstream operators like Enterprise Products Partners.
3. Mastercard
Payment processor Mastercard (MA 3.16%) is another rock-solid stock that has a good chance to make investors richer in 2023.
For most companies, historically high inflation is a headwind. But for a company like Mastercard, whose business is based on fees generated from payments put on credit cards, inflation can be a tailwind. No amount of inflation is going to stop consumers from buying basic necessity goods and services. To add, higher prices may steer consumers to lean on credit cards more often for the foreseeable future.
Mastercard’s fiscal prudence is a second reason to believe shares will head higher in 2023 after a difficult 2022. Although the company would likely be a successful lender, its management team has strictly stuck with payment processing. By choosing to avoid lending, Mastercard doesn’t have to worry about setting aside capital to cover loan losses. Not needing “just-in-case money” to cover loan losses is a big reason Mastercard’s profit margin is planted firmly above 40%.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
4. Berkshire Hathaway
Billionaire Warren Buffett isn’t infallible, but he’s been virtually unstoppable over long periods of time as CEO of conglomerate Berkshire Hathaway (BRK.A 3.20%) (BRK.B 3.36%). Over his 57 years as CEO, Buffett has overseen a 20.1% annual average return for his company’s Class A shares (BRK.A). That type of track record certainly makes Berkshire an attractive holding for 2023.
The Oracle of Omaha’s success has to do with two key aspects of Berkshire’s investment portfolio. Firstly, it’s packed with cyclical stocks — i.e., businesses that ebb-and-flow with the health of the U.S. economy. Even though recessions are inevitable, Buffett wisely understands that periods of expansion last considerably longer. He’s positioned Berkshire Hathaway to take advantage of these long-running bull markets.
The second factor helping Berkshire Hathaway is Buffett’s love of dividend stocks. Over the coming 12 months, Buffett’s company should collect north of $6 billion in dividend income. Dividend stocks are almost always profitable and time-tested. Better yet, they have a history of substantially outperforming companies that don’t offer a dividend, which is what makes them a smart hold for patient investors.
5. NextEra Energy
Electric utility stock NextEra Energy (NEE 4.72%) is a fifth top stock with everything needed to make you richer in 2023. Including dividends paid, NextEra has delivered a positive total return to its shareholders in 19 of the past 20 years.
The greatest thing about utility stocks is the predictability of their operating models. In NextEra Energy’s case, its customers don’t change their electricity consumption habits much from one year to the next. Being able to accurately forecast its annual cash flow is important, since it allows the company to outlay capital for new projects, acquisitions, and its dividend, without adversely impacting its profits.
But what really tends to set NextEra Energy apart from every other electric utility stock is its focus on green-energy projects. No electric utility in the country is generating more capacity from wind or solar power. With oil and natural gas prices well above average, the cost-savings of leaning on renewable energy really stands out for NextEra. Whereas most utilities are slow-growing, NextEra’s green-energy focus should help it sustain a high-single-digit earnings growth rate.
6. UnitedHealth Group
Another company with an impeccable track record of making investors richer is healthcare giant UnitedHealth Group (UNH 1.74%). Inclusive of its dividend, UnitedHealth has produced 18 positive returns for its shareholders over the past two decades.
One of the things that makes UnitedHealth Group tick is its insurance operations. Though insurance isn’t a fast-growing operating segment, it usually generates predictable cash flow. Because catastrophe events that lead to higher payouts are an inevitability for insurance companies, they often have little trouble passing along higher premiums to the individuals and businesses that hold policies.
But insurance is just one reason for UnitedHealth Group’s long-term outperformance. Quite a bit of credit goes to healthcare services subsidiary Optum, which is expanding at a faster organic rate than the insurance segment and providing a juicier operating margin, too. Optum provides software used by healthcare organizations, as well as prescription refills to hospitals, among its numerous services.
On a forward-earnings basis, PayPal has never been this cheap. PYPL PE Ratio (Forward) data by YCharts.
7. PayPal Holdings
The seventh and final top stock that can make you richer in 2023 is fintech specialist PayPal Holdings (PYPL -1.26%). Even though some PayPal users are feeling the sting of high inflation, the company’s key performance indicators continue to impress.
For example, when 2020 came to a close, the average active PayPal accountholder was conducting almost 41 transactions on a TTM basis. But as of the end of June 2022, the average active account was completing close to 49 transactions over a TTM period. This demonstrates that PayPal users are becoming more engaged over time, even in the face of a challenging economic environment. Since the company generates most of its revenue from transactions, a more-engaged user base is critical to sustained earnings growth.
PayPal is also historically inexpensive. Taking into account recently announced initiatives to reduce its annual operating expenses by at least $1.3 billion in 2023, as well as the company’s $15 billion share buyback program, PayPal looks like a veritable steal of a deal at less than 22 times Wall Street’s forecast earnings next year.
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