The stock market had a bad year in 2022. The S&P 500 fell 19.4% in those 12 months, even when earnings were taken into account. The tech-heavy Nasdaq composite, on the other hand, fell 33.1%. The things that caused Wall Street to drop in value are all too familiar: Fears of a recession, rising interest rates, and the war between Russia and Ukraine turned into a mountain of worries that investors couldn’t ignore. As a result, many stocks that had been doing very well took a beating as the “risk off” mentality took over the markets. The good news is that this gave buyers a chance to buy great companies at a lower price as the new year began.
Every year before the new year, U.S. News picks 6 stocks that people should buy. In 2023, these are the 6 best stocks to buy. Here’s how each has done so far this year, based on total gains that include dividends:
Apple Inc.
Apple comes first. If you leave out companies backed by the government, like oil giant Saudi Aramco, it is the biggest publicly traded company in the world. Like other tech stocks, AAPL shares had a rough year in 2022 because investors were scared of a slowdown and rising interest rates. In 2022, Apple shares took a rare 26.4% drop. Since then, they have gone up 34.7% through September 13, even though they recently took a drop after hitting all-time highs and passing $3 trillion for the first time in history. The company that makes iPhones is now trading at about 29 times earnings, which shows that the market believes in its ability to stay ahead of the competition.
Apple just released its newest product, the Apple Vision Pro, a virtual reality headset that costs $3,499 as a whole. With that price tag, it’s likely to be a niche product at first. But investors are hoping that some version of the technology will become a new source of real revenue for Apple, similar to the Apple Watch and the Mac. The company just recently released the iPhone 15 line of smartphones, which has better cameras, better mobile game performance, a USB-C port, and other features.
Dutch Bros. Inc.
Apple and other big, well-known companies can give investors some security, but smaller companies can grow and add to investors’ holdings. The coffee chain Dutch Bros is growing very quickly. To give you an idea of how big Apple is, Dutch Bros is less than 0.2% of Apple’s size, but it’s worth about $4.5 billion. In 2022, sales grew like weeds, jumping 48.4%. Dutch Bros. started out on the West Coast, and now most of its sites are in the West and Southwest. As of the end of June, the company had 754 locations in 14 states.
Its drive-thru shops don’t take up much space, so they’re cheap to open and help the company grow faster. The numbers show that: Because Dutch Bros. added 133 new stores in 2022, the number of stores they have opened has grown by 25%. The coffee chain’s earnings for the second quarter, which came out on August 8, showed that sales grew 34% year over year and same-shop sales grew 3.8% across the whole system. In the near future, the company said that its president, Christine Barone, would take over as CEO. Current CEO Joth Ricci will step down on January 1. The next day, the price went up almost 18%, but shares have since lost those gains.
Citigroup Inc.
Next is Citigroup, a multinational bank with both retail and business banking arms that is worth about $83 billion. Citigroup gives buyers two things: As rates rise and prices rise, this stock offers a good 4.9% forward dividend yield, which is a good safety net for owners. Citigroup uses about 30% of its revenue to pay out dividends, so the rate will not go down over time. At the moment, Citigroup is selling for less than seven times forward earnings and only 0.43 times book value. This makes it look like a value stock. Warren Buffett, a famous investor and financial expert, started buying Citigroup shares in the first quarter of 2022. His company, Berkshire Hathaway Inc. (BRK.A, BRK.B), now has a roughly $2.4 billion stake in the company. Citigroup stock is down 3.3% so far in 2023 (as of September 13).
Amazon.com Inc.
Amazon, the biggest online store, had a terrible year in 2022. Shares lost half of their value. Costs going up, a tight job market, problems in the supply chain, and falling customer confidence were some of the reasons. At the same time, the market was too quick to write off Amazon. Amazon Web Services, its big, quickly growing, and very profitable cloud services arm, is the company’s crown jewel. The amount of money that AWS makes each year is about $88.5 billion. If you look at how much Microsoft Corp. (MSFT), a company that competes with AWS in the cloud services market, is worth today, you can figure out that AWS is worth $1.06 trillion. At an estimated value of $1.49 trillion, buyers can buy the rest of Amazon’s huge businesses for about $430 billion, which is about the same amount of money the company made in sales in 2022.
Even though shares aren’t as cheap as they were at the beginning of the year, business is picking up again. On August 4, Amazon shares went up more than 8% after the company beat expectations for earnings and sales in the second quarter and gave investors better estimates for the third quarter. So far in 2023, AMZN has been a great investment. As of September 13, shares were up 72.4%.
Walt Disney Co.
The management team of a business is one of the most important things to think about when choosing stocks to hold for a long time. And now that former CEO Bob Iger is back, Disney has a lot of that. Iger was one of the most successful CEOs since the turn of the century. He oversaw the acquisitions of Pixar, Marvel Entertainment, and Lucasfilm, all of which were huge successes. In February 2020, he will hand over the CEO job to Bob Chapek. The House of Mouse reported a net loss of $460 million for the quarter ending July 1. This was due to one-time charges and revenue increase of 4%, which was less than expected. Disney+ recently raised its prices, which helped lessen the blow of losing a lot of users, mostly from its India platform Hotstar.
This year, Disney has been in a number of high-profile legal battles. Florida Governor Ron DeSantis has been going after the company for publicly opposing anti-LGBTQ bills. Also, Charter Communications Inc. (CHTR) recently settled a dispute with Disney over carrier fees for its ESPN channel, which was finally settled before the NFL’s first Monday Night Football game of the year. As of September 13, DIS stock was down 3.9% for the year.
PayPal Holdings Inc.
PayPal is a well-known financial stock that is selling for less than its pandemic lows from 2020. This is strange because the company earned $4.13 per share in 2022, which was more than any year from 2018 to 2020. In 2022, shares dropped 62% because the economy as a whole was weaker and the company lost its valuable partnership with eBay Inc. (EBAY). A five-year average ratio of 35.5 means that shares are now trading for about 14 times what they are expected to earn in 2023. Price-to-earnings (P/E) ratio for PayPal was 20.3 from 2015 to 2021.
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