2022 has been a terrible year for equity markets. Virtually every sector has been hit, some more than others. But a narrow group of stocks has performed extremely well. Going into 2023, these three stocks are right at the top of my buy list.
Top pick 1: Glencore
Since the pandemic lows of March 2020, the Glencore (LSE: GLEN) share price has risen a staggering 400%, making it the FTSE 100 best performer over that timeframe. Indeed, the share price recently hit a new all-time high.
Despite a meteoric rise, its shares still trade at a forward price-to-earnings (P/E) ratio of six. Recession fears and slowing consumption is worrying the market. Analysts have pencilled in significant price falls across a range of base metals such as copper and zinc.
However, analysts are not always right. Even if prices drop in the short term, I am still expecting demand for Glencore’s products to remain elevated throughout the decade.
Industrialisation, urbanisation, deglobalisation and decarbonisation are mega trends that will fuel demand for non-fossil fuel commodities well into the future.
Top pick 2: BP
I am a long-term bull when it comes to energy stocks. Therefore, when I see a pull-back in the price of oil like we have witnessed lately, then that is a buy signal.
If the global economic outlook for 2023 is weak, then how can I possibly be a proponent of Big Oil? One reason is that oil is a lot more inelastic than most people think, even during a recession. The second reason is that the supply side remains extremely tight.
There is very little to choose between BP (LSE: BP.) and its peer Shell. I own both and am looking to add to my positions in the New Year. But if I had to choose, I would go for the former.
At $40 a barrel, BP’s break-even cost is lower than Shell’s. It is also significantly further down the road in its journey to become an integrated energy company.
When oil reached $120 a barrel earlier in the year, analysts were bulls. Now very few are willing to make a case. As a contrarian investor, I am not afraid to take a position in oil at this time.
Top pick 3: Fresnillo
One sector that I am confident will do well in 2023 is precious metals. I am not, however, interested in investing in pure exploration-based companies, as they are too risky. I am instead looking for established players in the space with high-quality assets.
Fresnillo (LSE: FRES) provides me with exposure to both silver and gold. Its share price has recently started to turn upwards, after a long period of consolidation. This reflects a surge in the price of silver as of late.
Despite soaring inflation, both gold and silver have performed poorly in 2022. But I am not perturbed.
I see a huge opportunity in silver next year. History has demonstrated that it is a metal that can act very explosively during stagflationary periods. The 1970s demonstrated this point well.
As well as being viewed as a safe haven and hedge against inflation, silver has industrial application too. As the transition to net zero accelerates, I expect demand for silver to rise steadily in the years ahead.
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Of course, the decade ahead looks hazardous. What with rampant inflation, a “cost of living crisis” and war in Ukraine, knowing where to invest has never been trickier. And yet, with so many shares below recent highs, there are also potential opportunities to strike.
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Mark’s “Foolish” analysts have scoured the markets low and high.
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Please, don’t make any big decisions before seeing them.
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Andrew Mackie has positions in BP, Glencore and Fresnillo. The Motley Fool UK has recommended Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.