Investors should buy these 33 stocks for the best shot at outperformance in 2023 — according to a Deutsche Bank group that’s seen its stock picks double in value in five years

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Investors looking for ideas in the new year may want to call upon Deutsche Bank. Reuters This story is available exclusively to Insider subscribers. Become an Insider and start reading now. Deutsche Bank updated its list of favorite stock picks to include its 33 best ideas for 2023. The firm says its portfolio of top ideas has doubled in value in a little more than five years. Today, its best ideas include significant bets on industrials and consumer-focused companies.  2022 turned out to be a terrific year for energy companies, as the sector did shockingly well in a very bad year for the rest of the stock market.

Deutsche Bank isn’t expecting a repeat of that dynamic — at least, not to the same degree. This week the firm updated its quarterly list of its highest-conviction stock ideas, and there are no oil and gas companies represented among its analysts’ 33  favorites picks.

The Fresh Money list is wide-ranging, but the analysts seem more bullish on investing in the economic cycle in other ways, like through industrials companies such as Johnson Controls or GXO Logistics, wall and ceiling maker Armstrong, and Delta Air Lines.

Other major themes include bets on US consumers, including Amazon and Five Below, and some optimism about tech and media names like Oracle and T-Mobile.

It’s also noteworthy that there’s little representation for financial stocks even though interest rates have hit their highest levels in more than a decade. That’s good for banks, as higher rates let them make more money from loans, but the slowing economy and a drastically weakening housing market are bad news for many of the same companies.

After a very difficult year for stock and bond markets, Deutsche Bank also isn’t going overly defensive, as there are no utilities and relatively little representation of bond proxy sectors like consumer staples and real estate.

Research product manager Josh Ray and Director of North American Equity Research Matthew Barnard wrote that their firm’s stock picks have racked up a strong track record in a little over five years, more than doubling in value.

“Since inception (3Q 2017), our portfolio of ideas has returned +109% vs. the S&P +76%. Our rolling 12-month performance for the last four quarterly reports has outperformed the S&P by 5.29%,” they wrote.

The new additions to the portfolio for the first quarter are Estee Lauder, Five Below, Hertz, Prologis, Charles Schwab, Penumbra, R1 RCM, Universal Health Services, Aptar, GXO Logistics, Johnson Controls, Sherwin-Williams, Lam Research, Oracle, Qualcomm, and Warner Music.

The 33 stocks below are ranked from lowest to highest based on how much upside they have relative to Deutsche Bank’s 12-month price targets. All figures were current as of Thursday’s closing prices.

33. Skechers

Skechers Markets Insider Ticker: SKX

Sector: Consumer discretionary

Thesis: “While there are still ongoing logistical challenges lingering from 3Q, we believe SKX has a favorable setup in FY23 as meaningful margin tailwinds are likely to combine with a strong top-line, driving EPS upside. In addition, we think SKX would be more resilient in an economic downturn vs. peers given the company’s value proposition and the fact that its products are less discretionary.” — Gabriella Carbone 

Price target: $43

Upside to target: -0.5%

Source: Deutsche Bank

32. Warner Music Group

Warner Music Group Markets Insider Ticker: WMG

Sector: Communication services

Thesis: “We are incrementally positive on WMG continuing on its path of steady, durable revenue growth underpinned by a very favorable industry backdrop, along with multiple high-margin growth vectors as music expands beyond traditional streaming platforms.” — Ben Black

Price target: $37

Upside to target: -0.1%

Source: Deutsche Bank

31. Estee Lauder

Estee Lauder Markets Insider Ticker: EL

Sector: Consumer staples

Thesis: “We view EL’s risk/reward favorably given (i) tangible signs of progress away from Zero COVID policy in China since the company’s most recent results, and (ii) increasing confidence in the company’s ability to restore segment margins across makeup as revenues recover over time.” — Steve Powers

Price target: $266

Upside to target: 1.9%

Source: Deutsche Bank

30. AptarGroup

AptarGroup Markets Insider Ticker: ATR

Sector: Industrials

Thesis: “the company is the dominant player in nasal delivery solutions, but also produces other dispensing solutions and components for injectables. This business is currently growing at low double digits with strong 32% EBITDA margins. We expect the robust growth to continue considering the return of higher value prescription and consumer healthcare volumes following pandemic headwinds.” — Kyle White

Price target: $120

Upside to target: 7.0%

Source: Deutsche Bank

29. Las Vegas Sands

Las Vegas Sands Markets Insider Ticker: LVS

Sector: Consumer discretionary

Thesis: “We expect fundamental improvement in 2023 in the Macau market, and, as was the case in 2017, significant outperformance in the Macau based stocks. Given LVS no longer operates in the U.S., we believe, as investor seek growth and international exposure, LVS will screen well for broader consumer portfolio managers, given the healthy balance sheet and growth profile.” — Carlo Santarelli 

Price target: $56

Upside to target: 8.7%

Source: Deutsche Bank

28. Keysight

Keysight Markets Insider Ticker: KEYS

Sector: Information technology

Thesis: “Our bullish view reflects the company’s leadership within the Test/Measurement market, exposure to multiple secular tailwinds and upside to expectations. Keysight solutions cater to a broad array of end markets including commercial communications, aerospace & defense, autos and semiconductors, with revenue primarily oriented towards R&D spend (therefore relatively less exposed to a cyclical downturn).” — Matthew Niknam 

Price target: $190

Upside to target: 12.5%

Source: Deutsche Bank

27. Universal Health Services

Universal Health Services Markets Insider Ticker: UHS

Sector: Healthcare

Thesis: “Universal Health Services has turned a corner since its strong 3Q print with shares up by roughly 40% off the back of strong performance in both their acute and behavioral segments. We believe a sequentially more accommodating environment for hospitals into 2023 should help UHS’s performance pull in-line with peers.” — Pito Chickering

Price target: $168

Upside to target: 12.8%

Source: Deutsche Bank

26. Penumbra

Penumbra Markets Insider Ticker: PEN

Sector: Healthcare

Thesis: “Penumbra is entering a robust new product cycle, with a trio of major new product launches in 2023, each with game-changer potential. Rollout of Lightning Flash will begin in earnest during 1Q, with product sales accounting for most of the company’s 2023 top-line growth.” — Pito Chickering

Price target: $250

Upside to target: 13.2%

Source: Deutsche Bank

25. Five Below

Five Below Markets Insider Ticker: FIVE

Sector: Consumer discretionary

Thesis: “Our positive bias is underpinned by a combination of long-term unit growth potential, including unit expansion to 3,500 stores, driven by top-line catalysts including on-trend products, the addition of Five Beyond, tokenization efforts to deliver customer insights, and share gains. The growth opportunity and solid performance combine with an attractive valuation and entry price.” — Krisztina Katai

Price target: $201

Upside to target: 13.5%

Source: Deutsche Bank

24. Monster Beverage

Monster Beverage Markets Insider Ticker: MNST

Sector: Consumer staples

Thesis: “MNST remains a premium asset with a compelling secular revenue/EPS growth story, forthcoming margin improvement as cost and supply chain headwinds abate and pricing benefits mount, and an under-levered capital structure.” — Steve Powers 

Price target: $114

Upside to target: 13.6%

Source: Deutsche Bank

23. Johnson Controls International

Johnson Controls Markets Insider Ticker: JCI

Sector: Industrials

Thesis: “Its longer cycle backlog-driven business model with outsized exposure to non-resi should hold up favorably in 2023 given widespread concerns over a potential consumer driven recession.” — Nicole DeBlase

Price target: $74

Upside to target: 13.8%

Source: Deutsche Bank

22. US Foods

US Foods Markets Insider Ticker: USFD

Sector: Consumer staples

Thesis: “Our base case thesis is predicated on the stock returning to trading at normalized valuation multiples on our 2023e estimates, which are not particularly variant to consensus in any notable way. While we might have been a little early to this call last year, the core tenants of thesis are unchanged and we take comfort in the fact that the new CEO will officially take the helm on January 5, 2023.” — Brian Mullan

Price target: $41

Upside to target: 14.9%

Source: Deutsche Bank

21. Sherwin-Williams

Sherwin-Williams Markets Insider Ticker: SHW

Sector: Materials

Thesis: “we believe Sherwin shares have started to turn a corner driven by growing price / cost tailwinds as price increases continue to be implemented and raw material costs are starting to roll over. Perhaps most importantly though, as Sherwin exits ’22, it expects its strong pricing actions to fully offset the $3.5B, or ~$10.50/share in cost inflation it has incurred since the beginning of ’21.” — David Begleiter

Price target: $265

Upside to target: 16.4%

Source: Deutsche Bank

20. GXO Logistics

GXO Logistics Markets Insider Ticker: GXO

Sector: Industrials

Thesis: “The largest pure play warehouse logistics company, with solid potential for high-singledigit/low-double-digit growth for the next several years as companies look to make supply chains more robust and e-commerce friendly.” — Amit Mehrotra

Price target: $53

Upside to target: 19.1%

Source: Deutsche Bank

19. R1 RCM

R1 RCM Markets Insider Ticker: RCM

Sector: Healthcare

Thesis: “We believe R1 is in a position to benefit from the continued outsourcing of health system revenue cycle processes and upgrades to insourced legacy systems through its Cloudmed acquisition. We think the revenue cycle complexity, the need for RCM efficiency, and a challenging labor market will all be key trends that contribute to RCM’s future growth.” — George Hill

Price target: $14

Upside to target: 24.1%

Source: Deutsche Bank

18. Lam Research

Lam Research Markets Insider Ticker: LRCX

Sector: Information technology

Thesis: “With shares having suffered the most YTD (vs. semicap peers) and investor expectations already low enough into next year, we view LRCX’s risk-reward as attractive, given the expected recovery of memory WFE in CY24 off unsustainably low capex levels across the industry in CY23.” — Sidney Ho

Price target: $520

Upside to target: 24.7%

Source: Deutsche Bank

17. WillScot Mobil Mini

WillScott Mobile Mini Markets Insider Ticker: WSC

Sector: Industrials

Thesis: “We see the company exhibiting both defensive and growth characteristics; while the company is not immune from a recession, it is not a volume-driven story but is an idiosyncratic price/mix and runrate driven story with 3-year visibility, where simply the passage of time should improve revenues and drive EBITDA growth.” — Faiza Alwy

Price target: $56

Upside to target: 28.1%

Source: Deutsche Bank

16. US Bancorp

US Bancorp Markets Insider Ticker: USB

Sector: Financials

Thesis: “We further like USB as a defensive play given historically strong credit quality and risk mgmt.” — Matt O’Connor

Price target: $60

Upside to target: 31.3%

Source: Deutsche Bank

15. Prologis

Prologis Markets Insider Ticker: PLD

Sector: Real estate

Thesis: “We expect operating metrics to remain strong as the quest for last mile distribution and warehouse footholds has delivered robust leasing velocity and upwardly accelerating rents (3Q +59.7% signed).” — Derek Johnston

Price target: $149

Upside to target: 32.0%

Source: Deutsche Bank

14. T-Mobile

T-Mobile Markets Insider Ticker: TMUS

Sector: Communication services

Thesis: “We believe T-Mobile is the best multi-year growth story in telecom and cable, with multiple levers for value creation, including subscriber and ARPU-driven revenue growth, margin expansion (from merger synergies and operating leverage), and declining capital intensity, beginning in 2023.” — Bryan Kraft

Price target: $192

Upside to target: 32.9%

Source: Deutsche Bank

13. Delta Air Lines

Delta Air Lines Markets Insider Ticker: DAL

Sector: Industrials

Thesis: “Delta offers an attractive risk-return profile as it is one of the best positioned airlines to benefit from a strong domestic and improving international demand backdrop. Delta is leveraged to the most lucrative passenger segments that are likely to see the most upside in 2023.” — Mike Linenberg

Price target: $47

Upside to target: 33.4%

Source: Deutsche Bank

12. Aptiv

Aptiv Markets Insider Ticker: APTV

Sector: Healthcare

Thesis: “Aptiv presents a compelling opportunity to invest in the best secular trends in the autos space, which should materialize as one of the strongest earnings growth profile in the group in 2023, even with limited help from the industry environment.” — Emmanuel Rosner

Price target: $129

Upside to target: 34.6%

Source: Deutsche Bank

11. Select Medical

Select Medical Markets Insider Ticker: SEM

Sector: Healthcare

Thesis: “We are highlighting SEM stock as having the among the most asymmetric risk / reward profile in our coverage universe and believe the stock has potential to double over the next twelve months under a best case scenario.” — Justin Bowers

Price target: $35

Upside to target: 35.8%

Source: Deutsche Bank

10. Qualcomm

Qualcomm Markets Insider Ticker: QCOM

Sector: Information technology

Thesis: “We believe it should raise investor confidence and drive multiple re-rating in QCOM stocks at least closure to its 5 yr avg P/E (~14x) and possibly closure to its large cap peer group (18x). Consequently, we believe QCOM offers an attractive opportunity of solid growth at a discounted valuation, especially for longer duration investors.” — Ross Seymore

Price target: $150

Upside to target: 37.1%

Source: Deutsche Bank

9. Oracle

Oracle Markets Insider Ticker: ORCL

Sector: Information technology

Thesis: “The company’s core database business remains rock solid as the home for much of the world’s most valuable relational data while Cerner accretion potential and a still high degree of investor skepticism surrounding its rapidly growing Cloud business leaves significant upside opportunity for it to execute against over the coming quarters. Despite the strongest fundamental story we’ve seen in years at Oracle, the stock remains underappreciated and under owned.” — Brad Zelnick

Price target: $120

Upside to target: 42.3%

Source: Deutsche Bank

7. Charles Schwab

Charles Schwab Markets Insider Ticker: SCHW

Sector: Financials

Thesis: “We see the stock moving beyond the “rates trade” (earnings leverage to rate hikes) in 2023, with net interest margins continuing to expand even after the Fed stops its hiking cycle, and even with our assumption of a modest Fed easing cycle that we think could begin as early as 3Q23.” — Brian Bedell

Price target: $122

Upside to target: 46.8%

Source: Deutsche Bank

6. Block

Block Markets Insider Ticker: SQ

Sector: Information technology

Thesis: “Despite the market’s near-term focus on the macro headwinds where SQ continues to hold up better than feared, we believe the medium term outlook remains extremely promising. We continue to see resilience in SQ’s seller business, strong growth in Cash App, and potential for materially higher EBITDA margins in the future.” — Bryan Keane

Price target: $95

Upside to target: 46.8%

Source: Deutsche Bank

5. Amazon

Amazon Markets Insider Ticker: AMZN

Sector: Consumer discretionary

Thesis: “We believe that the trajectory for operating income growth from here has been generally de-risked and we expect upside as we move through 2023. Thus, with valuation now sitting near ATLs, 3Q earnings that in no way represented a structural break to Amazon’s business model, we maintain our Buy rating on the stock.” — Lee Horowitz

Price target: $130

Upside to target: 56.4%

Source: Deutsche Bank

4. SQM

SQM Markets Insider Ticker: SQM

Sector: Materials

Thesis: “We remain buyers of SQM given the fundamental lithium growth story, and incremental volumes coming online throughout 2023. While spot lithium prices are elevated, we believe this is likely to remain supported by only a handful of identified new projects coming online and demand strongly growing.” — Corinne Blanchard

Price target: $125

Upside to target: 59.2%

Source: Deutsche Bank

3. Armstrong World Industries

Armstrong World Markets Insider Ticker: AWI

Sector: Industrials

Thesis: “AWI is one of our top picks in Building Products, and having meaningfully underperformed “Housing” names in the 18+ months following the onset of the pandemic, the stock continues to be similarly punished amongst the group despite solid earnings momentum.” — Joe Ahlersmeyer

Price target: $113

Upside to target: 63.9%

Source: Deutsche Bank

2. Hertz Global Holdings

Hertz Markets Insider Ticker: HTZ

Sector: Industrials

Thesis: “We believe the market is discounting the overall health of the rental car industry, including on the all important topic of pricing power. We believe gains in RPD achieved over the past 2.5 years are sustainable and we like HTZ’s strategic priorities in terms of ramping up its electric vehicle (EV) fleet, focusing on premium corporate accounts, and deploying excess free cash flow generation to share repurchases, while still maintaining conservative leverage at the corporate level.” — Chris Woronka 

Price target: $29

Upside to target: 85.9%

Source: Deutsche Bank

1. Nio

Nio Markets Insider Ticker: NIO

Sector: Industrials

Thesis: “We expect deliveries to double in 2023. In addition to the product cycle, we believe the company’s efforts around user experience, battery swapping, overseas expansion, and internal battery cell development go very much underappreciated and will eventually show clear differentiation as the local Chinese market gets increasingly competitive.” — Edison Yu

Price target: $21

Upside to target: 93.4%

Source: Deutsche Bank

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