10 of the Best Stocks to Buy for 2023

These top stocks have proven themselves bargains in the early days of 2023.

2022 was a lousy year for the stock market. Even after factoring in dividends, the S&P 500 fell 19.4% in those 12 months, while the tech-heavy Nasdaq composite took a 33.1% haircut. The catalysts behind Wall Street’s sell-off are all too familiar: Inflation, soaring interest rates, persistent recession fears and the Russia-Ukraine war snowballed into an avalanche of worries that investors couldn’t ignore, and many previously high-flying stocks took a beating as the “risk off” mindset came to dominate markets. This, thankfully, provided a window of opportunity for investors to snap up great companies at a discount entering the new year. Before each new year, U.S. News selects 10 stocks to buy for the year ahead. Here’s a rundown of the 10 best stocks to buy for 2023 and how each has fared thus far based on total returns, which includes dividends.

Apple Inc. (ticker: AAPL)

First up is Apple, the largest publicly traded company in the world, if you exclude government-backed behemoths such as oil giant Saudi Aramco. Like other tech stocks, AAPL shares had a rough go of it in 2022, as recession fears and soaring interest rates spooked investors in the sector. Following a rare 26.4% pullback in 2022, Apple now trades at 25 times earnings, offering investors a sound entry point into the $2.4 trillion iPhone maker. Although its most-recent earnings report technically missed expectations, that was more due to supply chain snarls than demand issues. In fact, Apple reported an active installed base of more than 2 billion devices, and revenue in its high-margin services segment surpassed $20 billion. AAPL stock is bouncing back from its 2022 woes, with shares up 16.1% in 2023 through Feb. 9.

Dutch Bros Inc. (BROS)

While massive, established companies like Apple can offer investors some stability, smaller companies have more room for expansion and can boost portfolios. Enter the rapidly expanding coffee chain Dutch Bros, which for comparison’s sake, is roughly 0.25% the size of Apple despite being worth more than $6 billion. Revenue is growing like a weed, advancing 53% year over year in the most recent quarter. With initial roots on the West Coast, Dutch Bros locations are almost entirely in the West and Southwest, with 671 locations in 14 states. The small footprint of its drive-thru stores means they are relatively cheap to open, allowing for faster expansion. That shows up in the numbers: Dutch Bros opened 133 new stores in 2022, which works out to location growth of 25%. Investors have been piling into BROS to start 2023; it’s the best-performing stock among the 10 picks, with shares up 30% through Feb. 9.

Citigroup Inc. (C)

Next up is Citigroup, a roughly $100 billion multinational bank with both retail and investment banking arms. What Citigroup offers investors is twofold: First, it pays a healthy 4% dividend yield, which is a nice buffer for shareholders in an era of rising rates and high inflation. Importantly, that dividend is sustainable over time, with Citigroup using less than 30% of earnings to finance its payouts. Aside from its high dividend, Citigroup also looks like a value stock at current levels, trading for less than 8 times forward earnings and just 0.54 times book value. Famed investor and financial guru Warren Buffett began buying Citigroup stock in the first quarter of 2022, with Berkshire Hathaway Inc. (BRK.A, BRK.B) owning a roughly $2.8 billion stake in the company at the end of the third quarter. Citigroup stock is up 11.6% in 2023 through Feb. 9.

Amazon.com Inc. (AMZN)

Dominant internet retailer Amazon was also named one of the 10 best stocks to buy for 2023 heading into the new year after a miserable 2022 in which shares lost 50% of their value. The culprits included cost inflation, a tight labor market, supply chain challenges and dwindling consumer confidence. That said, the market was far too eager to write off Amazon, whose crown jewel is Amazon Web Services, its large, fast-growing and massively profitable cloud services arm. AWS has an annual revenue run rate of more than $85 billion. Given cloud services rival Microsoft Corp. (MSFT) trades for about 10 times sales, putting the same multiple on AWS pegs its value at $850 billion. At Amazon’s current $1 trillion valuation, investors are getting the rest of the company’s massive operations — which posted 2022 sales of $434 billion — for about $150 billion. AMZN has proven to be a good pick thus far in 2023, with shares up 17% through Feb. 9.

Walt Disney Co. (DIS)

One of the most important things to consider when selecting stocks to buy and hold for the long term is a company’s management team. And with the recent return of longtime CEO Bob Iger, Disney has that in spades. Considered one of the best CEOs this side of the millennium, Iger presided over a series of wildly successful acquisitions — including Pixar, Marvel Entertainment and Lucasfilm — before passing the CEO role to Bob Chapek in February 2020. Disney is fresh off its first earnings report after Iger’s return, a fiscal first quarter in which Disney exceeded analyst expectations for both earnings and revenue. After a price hike for streaming service Disney+, subscriber losses were lower than feared, while revenue from its theme parks soared 21% in the quarter. Iger’s magic touch has been on full display in 2023, with Disney shares up 27% this year through Feb. 9.

PayPal Holdings Inc. (PYPL)

A time-tested and well-run financial stock, PayPal is curiously trading for less than its pre-pandemic levels, despite earnings per share of $4.13 in 2022 — higher than any year between 2018 and 2020. Shares were absolutely hammered in 2022, shedding 62% due to a weaker macro environment and the loss of its lucrative relationship with eBay Inc. (EBAY). Shares now trade for about 20 times expected 2023 earnings, despite a five-year average price-earnings ratio of 36.5. Between 2015 and 2021, PayPal’s lowest P/E ratio was 20.3. Applying that conservative multiple to average expected 2023 earnings of $4.75 yields a price of $96.43 per share by early 2024, implying upside of about 23% from its Feb. 9 close. Recently announced deals with Apple Pay to accept PayPal- and Venmo-branded cards should expand its presence in brick-and-mortar retail, while Amazon also now accepts Venmo, giving PayPal exposure to its vast online marketplace. PYPL stock is up 10.1% in 2023 through Feb. 9.

EOG Resources Inc. (EOG)

A return pick from last year’s best stocks to buy list, EOG is a U.S. oil and gas producer coming off a successful 2022 in which shares posted a total return of 56.3%. Shares nonetheless are still priced like a value stock, trading for about 10 times earnings and about 9 times forward earnings. Growth will, no doubt, decelerate in 2023 — the red-hot energy market is unlikely to skyrocket as it did in the inflation- and war-plagued year of 2022 — but investors shouldn’t forget the value of an inflation hedge in their portfolios. A 2.6% dividend yield and impressively low payout ratio of less than 24% give EOG some credibility with income investors as well. As inflation concerns ebbed in the early months of 2023, EOG shares have merely treaded water, posting a year-to-date loss of 1.2% through Feb. 9.

Grupo Aeroportuario del Sureste SAB de CV (ASR)

Another return pick from last year’s list, this off-the-beaten-path stock is an $8 billion Latin American airport operator. The only industrial on this list, ASR also offers geographic diversification and is a mid-cap company that isn’t on most investors’ radars. The stock was a diamond in the rough in 2022, posting a total return of 17% in a bear market. It helped, of course, that passenger traffic returned with a vengeance this past year: In January 2023, passenger traffic shot up 29.8% year over year, driven by a 33.6% surge in Mexico and a 37.8% increase in Puerto Rico. Airport operators earn money when airlines rent out gates and pay landing fees, as well as from parking, ground transportation, airport retail and advertising, among other sources. ASR’s largest airports are in Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia. The stock pays a 2.9% dividend, and shares are up 15.2% in 2023 through Feb. 9.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

Taiwan Semiconductor Manufacturing, a $500 billion business and the dominant high-level foundry for advanced chips, is next on the list. In the semiconductor industry, foundries are companies that manufacture chips for other companies, and TSM enjoys a massive market share for chips 7 nanometers and under. Apple, which has started to shift its supply chain away from China, is one of TSM’s biggest customers. The company reported fourth-quarter results that beat both top- and bottom-line expectations, with revenue jumping 43% and earnings per share surging 78%. Trading at just 14 times earnings and paying a 1.9% dividend, TSM is, incidentally, yet another Buffett holding, and its shares have been crushing it in early 2023, posting gains of 29.8% through Feb. 9.

Diageo PLC (DEO)

Last up is Diageo, the roughly $100 billion, U.K.-based beverage giant. A consumer defensive stock, Diageo should be able to hold up in a strained macro environment, as alcohol tends to be relatively recession-resistant. As with tobacco, alcohol consumers tend to have a fair degree of brand loyalty, and the company’s slate of elite brands gives it enviable positioning in its space, with bar staples such as Johnnie Walker, Guinness, Tanqueray, Don Julio, Smirnoff, Baileys, Ciroc and Bulleit all under its umbrella. Despite net sales jumping 21.4% in fiscal 2022, the stock fell with the broader market last year, losing 17.4%. This is largely due to its base in the U.K. and a bad year for the British pound. That slump can’t last forever, and shares now trade for 21.5 times forward earnings, a discount to its five-year average forward P/E of 24.4. The defensive DEO has so far underperformed in 2023’s rah-rah market, slipping 3.3% through Feb. 9.

10 of the best stocks to buy for 2023:

— Apple Inc. (AAPL)

— Dutch Bros Inc. (BROS)

— Citigroup Inc. (C)

— Amazon.com Inc. (AMZN)

— Walt Disney Co. (DIS)

— PayPal Holdings Inc. (PYPL)

— EOG Resources Inc. (EOG)

— Grupo Aeroportuario del Sureste SAB de CV (ASR)

— Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

— Diageo PLC (DEO)

More from U.S. News