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How to Pick Stocks in 2023

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  • (1:00) - Breaking Down The Earnings Overview: Is It Really That Bad?
  • (6:15) - Will The Fed Soften The Landing To Dodge A Recession?
  • (10:50) - Creating A Top Ten Portfolio: How Do You Do It?
  • (14:30) - Who Were The Big Winners In 2022 And Will They Continue?
  • (28:00) - Small Cap vs Large Cap: Who Will Come Out On Top In 2023?
  • (34:30) - Episode Roundup: ALB, NTR, ORCL, PXD, CMA


Welcome to Episode #341 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is joined by Zacks Director of Research, and earnings guru, Sheraz Mian, to discuss the earnings outlook for the rest of 2022 and 2023 and how that will impact what stocks he selects for Zacks Top 10 portfolio.

Sheraz hand-picks the Zacks Top 10 portfolio every January. Through the end of Nov 2022, the 2022 Zacks Top 10 was down 10.6% but that was beating the S&P 500, which had fallen 13.7% during that same time.

Some of his bets paid off which helped the portfolio to outperform.

What Worked in 2022

1.       Albemarle (ALB - Free Report)

Albemarle is a large American lithium producer. Lithium is one of the key ingredients in electric vehicle batteries. With General Motors saying they will be selling a million EV cars a year in the United States by 2025, that means that there will be big demand for the batteries, and, for now, also for lithium.

Albemarle shares are up 12% year-to-date but the shares remain cheap. Albemarle trades with a forward P/E of 12.3 as earnings are expected to rise 420% this year and another 34% next year.

Will Albemarle’s rally continue into 2023?

2.       Nutrien (NTR - Free Report)

Nutrien is a large Canadian fertilizer manufacturer. Potash prices broke out to new highs this year, boosted by fears of a shortage during the Ukraine War. But potash prices have now fallen, and so have Nutrien’s earnings estimates.

After soaring to new multi-year highs in the spring, Nutrien shares have come back down to earth and are now up only 2.5% year-to-date. But they are in the green when a lot of other stocks are not.

Nutrien earnings are expected to rise 122% this year, but fall 6% in 2023. Still, Nutrien shares are cheap, with a forward P/E of just 5.6.

Nutrien is a Zacks Rank #5 (Strong Sell). Will earnings turn around next year?

3.       Oracle (ORCL - Free Report)

Oracle is in the red this year, but it’s off its recent lows. Shares are down just 7.6% year-to-date.

Earnings are expected to be up 1.2% in fiscal 2023 and another 11.7% in fiscal 2024. Oracle shares are now cheap, with a forward P/E of just 16.4.

Is the worst over for Oracle shares and tech?

Energy and the Banks

What Sheraz did not have in 2022’s top 10 portfolio was an energy stock or a bank. Could he be poised to put one, or both, in 2023’s portfolio?

4.       Pioneer Natural Resources

Sheraz confessed on the podcast that exploration and producer, Pioneer Natural Resources, was on his short list for the 2022 Top 10. But he ultimately didn’t put it in the portfolio.

Energy has been the best performing sector in the S&P 500. Pioneer Natural Resources is up 23.6% year-to-date and that doesn’t even include it’s big dividend.

Earnings are expected to jump 136% this year but fall 16.7% next year as oil and natural gas prices fall.

Pioneer Natural Resources is cheap, with a forward P/E of 7.

Should energy be in your portfolio in 2023?

5.       Comerica (CMA - Free Report)

Comerica is a large Texas bank, which also has operations in several other states including Michigan. The banks have struggled in 2022 even as the Fed has raised rates.

Comerica shares have fallen 23.8% year-to-date and are dirt cheap on a P/E basis, with a forward P/E of 8.0.

Earnings are expected to be up just 1.4% in 2022 but analysts are bullish for next year, with earnings growth forecast to be 18.8%.

Comerica pays a dividend and it’s now yielding 4%.

Will the banks finally have their day in the sun in 2023?

What Else Do You Need to Know About Picking Stocks for 2023?

Listen to this week’s podcast to find out.

[In full disclosure, Tracey owns shares of NTR and PXD in her personal portfolio.]


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