Large-cap stocks could make a comeback in 2023.
Last year wasn’t a memorable one for U.S. large-cap stocks, with the S&P 500 index falling 19.4% in 2022. That’s the worst S&P performance since 2008, at the height of the Great Recession. As the calendar turned from 2022 to 2023, however, large-cap stocks are making a comeback, with the S&P 500 up 1.5% this year through Jan. 19, and sporting a 5.5% gain over the past three months. While nobody knows exactly what happens with a roiling economy going forward, market mavens are seeing some slivers of light in the large-cap sector. If you’re beating the bushes for some stellar big-cap plays in early 2023, these headliners should be at the top of your list.
Altria Group Inc. (ticker: MO)
Altria is in bounce-back mode, with the stock up 1.8% over the past three months, but down almost 4% over the past year. This nicotine giant, home to Marlboro cigarettes, Black & Mild pipe and cigar products, and smokeless tobacco like Copenhagen and Skoal, represents what Goldman Sachs calls a “soft landing” stock for investors looking for some upside protection in a potentially recessionary economy. In a recent research report, Goldman added Altria to a list of 36 profitable companies in defensive sectors with solid dividend yields. MO has diversified into the cannabis and e-smoking markets, and the company still maintains a solid hold on Anheuser Busch InBev SA (BUD), the brewing giant. MO also stands as a major dividend king, offering investors an 8% yield, making the stock a large-cap winner for income-minded investors.
AT&T Inc. (T)
This telecom behemoth is on a roll, with a share price rise of 6% in the past 30 days and 21.9% over the last 90 days, as of Jan. 19. AT&T has found success focusing on its core telecom operations, with its most recent earnings per share besting analyst estimates by 10.4% and revenues clocking in at 9.6% ahead of expected estimates. T’s divestment of WarnerMedia and DirecTV (which just lost NFL Sunday Ticket to YouTube), enables it to curb some debt and stabilize its core wireless and broadband telecom businesses. “Our results show our strategy is resonating with customers as we continue to see robust levels of postpaid phone net adds and approach 1 million AT&T Fiber net adds for the year,” said company CEO John Stankey.
Tesla Inc. (TSLA)
After a rough year where TSLA saw its share price drop by over 50% and found its leader Elon Musk jousting with the public, the company has got off to a better start in 2023. Its stock price is up 3.2% so far in January, after an eye-opening vehicle price cut that analysts, after some consideration, now largely view as a savvy business strategy. “This is a clear shot across the bow at European automakers and U.S. stalwarts,” said Wedbush analyst Dan Ives. “(It shows) Tesla is not going to play nice in the sandbox with an EV price war now underway. Margins will get hit on this, but we like this strategic poker move by Musk and Tesla.” Wedbush has placed a $175 price target on TSLA stock (it closed at $127.17 on Jan. 19) and Ives notes that the price cuts should boost Tesla vehicle sales by up to 15% in 2023.
Cardinal Health Inc. (CAH)
The U.S. health care sector is still going strong in early 2023, with the benchmark Vanguard Health Care ETF (VHT.IV) up over 11% in the past three months and up 14.8% over the past 10 years as investors continue to bet on the graying of America. Cardinal Health should benefit from its new Velocare supply chain network, which provides critical medical supplies to home-based patients in only a few hours. Regular passive income is another plus, as CAH has paid dividends for 28 years in a row, and now offers income-minded investors a 2.6% yield. With annual revenue to rise by 11% on a year-to-year basis in 2023 and a stock that has delivered a 47% gain over the past few years, look for more growth for Cardinal Health in 2023.
Consolidated Edison Inc. (ED)
The utility that serves New York City got a quick start out of the gates in 2023, with its shares rising in the first two weeks of the new year, before falling back more recently. But ED’s current 3.4% dividend yield adds more fuel to the fire for investors, as does a recent Bank of America share price target hike of $95 per share from $78, compared with a closing price of $92.48 on Jan. 19. Utilities may be boring, but Con Ed’s well-earned reputation for keeping the lights on and the dividend payments coming should bolster the stock in 2023.
JPMorgan Chase & Co. (JPM)
This financial giant is booming as 2023 opens for business, with share price growth of 16.5% over the last 90 days after an off year in 2022. JPM offers a solid dividend yield of 3%. The investment bank recently bested analyst expectations on fourth-quarter earnings, with quarterly profits of $11.01 billion ($3.57 a share) and net revenues of $35.57 billion compared to estimated earnings of $3.07 per share and revenue of $34.35 billion from banking analysts. Calling the Q4 results “pretty decent,” Brian Shepardson, portfolio manager of the James Balanced: Golden Rainbow Fund, is bullish on JPM. “If there are any more hiccups with inflation or fears around Federal Reserve moves, they have the flexibility to come out of it really well,” Shepardson says in a recent research note.
Walmart Inc. (WMT)
Walmart emerged from the 2022 holiday shopping season in good shape, trading up 4.2% since Oct. 19, around the time when the busy retail season kicked into gear. With the big-box retailer’s stock trading at $141 in mid-January (it’s dropped back to around $139 since), Jefferies consumer goods analyst Corey Tarlowe just popped a “buy” rating on WMT and established a price target of $175. That’s significantly higher than the consensus analyst Walmart target price of $162, with UBS analysts calling for a price target of $168 for WMT stock. It’s worth noting that Walmart performed well during the Great Recession with a menu of low-cost consumer products that tend to appeal to shoppers’ tastes during slow economic periods. That scenario hasn’t changed in 2023 — a year where most economists are calling for another recession. Look for Walmart to shine in a year when many retailers should be stuck in survival mode.
7 of the best large-cap stocks to buy for 2023:
— Altria Group Inc. (MO)
— AT&T Inc. (T)
— Tesla Inc. (TSLA)
— Cardinal Health Inc. (CAH)
— Consolidated Edison Inc. (ED)
— JPMorgan Chase & Co. (JPM)
— Walmart Inc. (WMT)
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Update 01/20/23: This story was published at an earlier date and has been updated with new information.