27 Stocks for 2023

Podcast Summary

• Watch REITs and retail consumer discretionary market in 2023: Investors should consider REITs for their potential to outperform during inflation and offer high dividends, while the retail consumer discretionary market could present opportunities for income and trend navigation.

  Investors should keep an eye on Real Estate Investment Trusts (REITs) and the retail consumer discretionary market in 2023. Dylan Lewis from Motley Fool Money highlighted the potential of REITs, which are currently trading at discounts to their net asset values and offer dividends of 5% or more. Despite the risk involved, REITs have historically performed well during inflationary times and periods of higher interest rates. On the other hand, Jason Moser from Motley Fool believes that the retail consumer discretionary market will be an interesting industry to watch, as consumers face tougher financial situations due to higher interest rates and the lack of additional stimulus. Both industries present opportunities for investors looking to build a sustainable income stream or navigate market trends.

• Record low savings rate and paycheck to paycheck living impact consumer spending: The US savings rate dropped to a record low of 2.3%, leading to more Americans living paycheck to paycheck. This financial strain is predicted to impact consumer spending, particularly during the holiday season. Additionally, the reshoring of manufacturing and the shift to Connected TV advertising are shaping the business landscape.

  The personal savings rate in the US has hit a record low of 2.3%, and more Americans are living paycheck to paycheck than ever before. This financial strain is expected to impact consumer spending, with modest growth predicted for the holiday season. A trend that is gaining momentum is the reshoring or onshoring of manufacturing back to the US, as companies seek to mitigate supply chain pressures and inventory issues. In the advertising world, Connected TV (CTV) is a rapidly growing trend, with companies like The Trade Desk seeing significant growth from this sector. The transition from traditional cable advertising to CTV is accelerating faster than anticipated, leaving traditional media companies scrambling to keep up. These trends, driven by economic factors and technological advancements, respectively, will shape the business landscape in the coming years.

• Connected TV ad market growth and new players: Projected Connected TV ad spending to double by 2024, with Netflix exploring ad-supported tier, putting pressure on Amazon's CEO Andy Jassy to succeed in the evolving market.

  The Connected TV ad market is experiencing significant growth, with spending projected to increase from $6.3 billion in 2021 to over $11 billion by 2024. Traditional players like Roku, Hulu, and YouTube are seeing their market share decrease as new streaming services such as Peacock, Paramount Plus, Netflix, Disney+, and Amazon enter the scene. Netflix, in particular, is exploring an ad-supported tier, a departure from its traditional subscription model. This shift in the market puts pressure on Amazon's CEO, Andy Jassy, who took over from Jeff Bezos in 2021. While Jassy has been successful in his previous role at AWS, the challenge of managing Amazon's massive retail operation may test his abilities. The similarities in their voices between Jassy and Bezos are an interesting observation, but the real question is whether Jassy can live up to the legacy left by his predecessor.

• Tech companies under pressure to show profitability: Palantir aims for full-year non-GAAP profitability in 2023, while Industrial REITs like Prologis, Easterly, and STAG benefit from e-commerce growth and warehouse demand.

  Several tech companies, including Palantir, are under pressure to show profitability and reduce stock-based compensation to attract investors. Palantir has committed to delivering full-year non-GAAP operating profitability starting in 2023. Industrial REITs, such as Prologis, Easterly Government Properties, and STAG Industrial, are expected to benefit from the continued growth of e-commerce and the need for more warehouse and fulfillment space in the US. The Trade Desk, a profitable advertising technology company, is another stock with upside potential due to its role in the growing connected TV market.

• Competition and Costs in Entertainment and Financial Sectors: Consumers may face increased fees and charges with popular buy now, pay later services, and should consider more sustainable financial solutions.

  The entertainment industry is facing increasing competition and rising content costs, leading to potential marginal profits for companies, while consumers may soon question the value of multiple streaming services. Meanwhile, in the financial sector, the buy now, pay later trend, while popular among consumers, has raised concerns due to potential increases in fees and charges. Companies in this space have seen significant valuation increases, but their growth rates are slowing down. The researchers from the Universities of Washington, California Irvine, and Singapore Management University found that use of buy now, pay later services can result in more bank overdraft charges, credit card charges, and credit card late fees. These findings suggest that consumers may be better off reconsidering their use of these services and looking for more sustainable financial solutions.

• Investors' Perspectives on Market Volatility and Long-Term Investments: Despite market volatility, investors Matt and Jason emphasized the importance of a long-term perspective and buying great companies at discounted prices. They also highlighted Salesforce as a potential surprise in 2023, despite its challenges.

  The use of buy now, pay later platforms is projected to reach a staggering $1 trillion by 2025, but some investors are more concerned than others. Matt mentioned Blackstone as a stock he's not worried about, despite recent news of investors being unable to withdraw from one of their funds. Jason, on the other hand, expressed confidence in Home Depot as a long-term investment, despite its underperformance in 2022. In the face of market volatility, they both emphasized the importance of a long-term perspective and taking advantage of opportunities to buy great companies at discounted prices. The Motley Fool team has put together a report on five such companies that are currently trading below $49 a share, which investors can access for free by visiting fool.com/report. In 2023, Salesforce is expected to surprise investors, despite its challenging year marked by leadership changes and a significant stock price drop.

• CEOs respond to business challenges, economic shifts, and cybersecurity concerns: CEOs assess workforce, possibly right-size businesses amidst pressure on margins. Economic landscape may surprise with deflation instead of inflation. Cybersecurity remains crucial, with long-term prospects strong for companies like CrowdStrike. Investors may miss opportunities in companies like Prologis, which could offer significant returns.

  The business environment is facing challenges, with companies like Salesforce feeling pressure on margins and investors demanding greater profitability. CEOs like Marc Benioff are responding seriously, including assessing their workforce and possibly right-sizing their businesses. Meanwhile, the economic landscape may surprise investors with deflation rather than continued inflation, as signs point to slowing commodity prices, rents, and housing markets. In the tech sector, cybersecurity remains a non-negotiable requirement, and while some companies like CrowdStrike are experiencing tough times, their long-term prospects remain strong due to the growing importance of their services. Investors may regret missing opportunities in companies like Prologis, which is the world's largest REIT and could offer significant returns as prices continue to rise. Overall, the business world is filled with uncertainty, but those who stay informed and adapt to changing conditions are likely to thrive.

• Growth in industrial real estate rents, private equity acquisitions, and long-term investments: Industrial real estate rents are rising due to demand for warehouse space. Private equity firms like Tama Bravo are acquiring companies in banking software and event production. Controlled environment agriculture, represented by AppHarvest, is a long-term investment opportunity in the food industry.

  The industrial real estate sector, specifically Prologis, is expected to see significant growth in rents due to the increasing demand for warehouse space. Additionally, private equity firms, such as Tama Bravo, are likely to make acquisitions in industries like banking software (Ncino) and event production (Live Nation), while controlled environment agriculture, represented by AppHarvest, is a long-term investment opportunity in the food industry. The market is seeing an influx of companies through Special Purpose Acquisition Companies (SPACs), which may lead to earlier market entries than ideal. It's important for investors to be patient and consider the long-term potential of these investments. Prologis, Ncino, and Live Nation are potential targets for acquisitions, and AppHarvest is a promising player in the controlled environment agriculture sector.

• Uncertainty surrounds a company's future, potential M&A activity, and renewable energy predictions: The speaker expresses uncertainty about a specific company's future, predicts a potential shift in renewable energy reliance on fossil fuels, and boldly guesses Elon Musk will step down as Twitter CEO and be replaced by Sheryl Sandberg.

  The speaker expresses uncertainty about the future of a specific company, suggesting it could be an acquisition target. Additionally, the speaker believes that the hype around Special Purpose Acquisition Companies (SPACs) may have passed, and renewable energy sources may continue to rely on fossil fuels for the foreseeable future. The speaker also makes a bold prediction that Elon Musk will step down as Twitter's CEO and be replaced by Sheryl Sandberg. Regarding the company in question, the speaker expresses confidence in its leadership and funding but wonders if it could be acquired due to its low stock price. The speaker also shares a more cautious view on the future of renewable energy, acknowledging the high capital requirements and inefficiencies of current technologies. Lastly, the speaker makes a bold prediction about Elon Musk stepping down as Twitter's CEO and being replaced by Sheryl Sandberg. Overall, the speaker provides insights on potential M&A activity, the future of renewable energy, and a bold prediction about a high-profile executive change.

• New players and changing market dynamics pose challenges for Coinbase: Fidelity's entry into crypto trading and regulatory challenges could impact Coinbase's revenue and stock price, while the growth of the sports gambling industry and potential insider trading present regulatory hurdles for various industries. On a positive note, the acquisition of Topgolf could open up golf to a wider audience and present new opportunities.

  The emergence of new players and changing market dynamics could pose significant challenges for businesses like Coinbase, which heavily rely on retail investor trading for revenue. Fidelity's entry into the crypto trading market with zero commissions and low spreads could lead to less trading volume and lower prices for Coinbase, potentially causing a significant drop in its stock price. Additionally, the sports gambling industry's growth and the potential for insider trading present regulatory challenges that could impact various industries. On a more optimistic note, the acquisition of Topgolf by Topgolf Callaway Brands could open up the game of golf to a wider audience and present new opportunities for growth. Overall, these discussions highlight the importance of staying informed about market trends and competition in order to navigate potential risks and opportunities.

• Topgolf offers more than just golf: Topgolf generates revenue from food, beverages, and entertainment, making it a potential investment opportunity even for non-golfers. Easterly Government Properties, a REIT leasing to federal agencies, offers a 7.5% dividend yield and growth potential.

  Topgolf, despite being associated with golf, offers more than just the sport itself. It generates food and beverage revenue and provides an entertaining experience, making it a potential investment opportunity even for those who don't enjoy golf. Another intriguing investment suggestion was Easterly Government Properties (DEA), a REIT that leases exclusively to federal agencies, offering a guaranteed 7.5% dividend yield. Despite its growth potential due to the GSA's shift to a leasing model, the stock remains undervalued. These discussions highlight the importance of considering various aspects of a business before making an investment decision.