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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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