3 hot investment ideas for 2023

I’ve been thinking about how best to position my investment portfolio for the coming year and beyond. Here are three thematic ideas I’m currently using that can help maximize potential results.

Asset manager

2022 is a scary year for asset managers. Where are my own shares in the sector compared to a year ago? M&G down 7%, abrdn has fallen 22% and Jupiter has shed 47% of its value. Alas!

On the upside, the average yield of these three stocks at the current share price is 9.8%. Even that can’t seem to last, though. Jupiter has announced a new dividend policy that I expect to lead to a lower payout.

Does a terrible 2022 mean asset managers can bounce back in 2023? Or worried about declining profits because customer withdrawals will grow with the recession, causing stock prices to fall?

One scenario is possible in my case. However, I feel the long-term investment case for the sector remains strong, meaning that the current share price may present a buying opportunity for my portfolio.

Energy gluttons

As energy prices rise in 2022, costs will rise for energy-intensive industries. That eats into profits and lowers stock prices, sometimes dramatically.

But in most cases, I see these costs as temporary in nature. At some point in the future, they will fall again, while the economics of the business will become clearer. In some cases that will be a reminder of how attractive the business is. So buying now while many investors are still worried about energy costs could be a worthwhile move for my portfolio.

Take a polymer manufacturer Victrex precedent. The stock is down 33% over the past 12 months. In its last financial year (which ended at the end of September), the company saw its profit before tax fall by 5%. The company’s chief executive described the energy inflation it faced during the period as “did not exist before“. But while profits fell, sales volume rose 8% and revenue rose 11%.

Higher costs allow companies to increase their own selling prices. This could mean that, if energy prices fall again, they continue to benefit from higher selling prices. One investment theme I’m looking for this year is power-hungry companies whose profits have been eroded by high energy prices, but underlying sales volumes remain strong.

House builder

I have been looking for an investment in the house persimmon a moment now. What caused me to break down was the housing market. So far this has been uneven and relatively small. But it has taken its toll.

The imbalance between supply and demand may mean what we see this year is a housing market wobble and then a recovery. An alternative scenario is a complete property crash that occurs or at least begins in 2023.

In case of an accident, I don’t want a home builder in my portfolio before. But if all we end up is a wobble, I see value for the portfolio at the current price of Persimmon and some peers. So, I will be monitoring the property market in 2023 to help me decide if I should make an investment.