1 stock that I think will outperform the FTSE 100 in 2023

Mining Business (LSE:EDV) is a member of FTSE 100. The stock outperformed the index in 2022 and I think it will do so again this year.

I expect 2022 interest rates to lead to a recession this year. As a result, I expect gold prices to do well compared to stock prices in general.

This, I think, should be good news for companies like Endeavor, which own and operate gold mines in Africa. Therefore, the stock will surpass the FTSE 100 in 2023.

recession

In 2023, I expect two things. The first is the recession and the second is the relatively stable price of gold.

The reason I think it’s a recession is because interest rates have gone up. From 0.1% at the beginning of 2022, the Bank of England increased the rate to 3.5%.

In my view, this makes recession almost inevitable. And I think this means that the earnings of FTSE 100 companies will face significant headwinds.

Lower earnings, as I see it, could lead to lower stock prices. While this is true in general, I think there will be exceptions for investors who know where to look.

During economic crises, the price of gold often remains stable. Investors have historically seen gold as a ‘safe haven’ in times of stress in the stock market.

I expect the same thing to happen in 2023. I expect that a significant class of stock market participants will seek shelter as stock prices fall, causing gold prices to remain stable.

gold mining

That’s why I think gold prices will continue to rise even as stock prices fall. So am I looking at shares in mining companies, instead of just buying gold outright?

One reason is that gold is a speculative asset, rather than an investment. In other words, it has no income and does not generate any money.

Gold mining companies, on the other hand, generate cash by extracting and selling gold. This distinction is important.

The only way to make money owning gold is by selling it. So if the price of gold goes down, I will lose if I own the metal directly.

With the mining company, I can earn money from the company that sells the gold that is produced. As long as the company remains profitable, I can make money even if the price of gold goes down.

Mining Business

That’s why I prefer stocks in gold mining companies to the metal itself from an investment perspective. And I see FTSE 100-listed Endeavor Mining as a particularly attractive stock to own.

The main reason for choosing Endeavor over other gold miners is that it has some of the lowest production costs in the industry. I think this is a big advantage.

Lower costs should, in my view, help the company remain profitable even if gold prices fall more than expected. That is why I think it will outperform the FTSE 100 this year.

Low cost companies have risks. The political situation in countries where mines are located can be unpredictable and this creates uncertainty.

Overall, I expect a strong year for this stock. I am looking to add to my portfolio in the near future.