11 Best Sectors To Invest In Heading Into 2023

In this article, we discuss the 11 best sectors to invest in heading into 2023.

With a recession on the horizon, many investors are cautious when it comes to putting their money in the equity market. However, although the S&P 500 is in bear territory, there are some sectors which are performing better than the others. In 2022, safe haven assets and defensive market sectors like utilities, healthcare, consumer staples, and gold have outperformed relative to the overall US market. The energy sector has also gained close to 50% year-to-date due to the Russian invasion of Ukraine. 

Although defensive sectors are considered to be more lucrative investments heading into a recessionary environment, if the central bank manages to slow down interest rate hikes after achieving about 5.0% to 5.5%, then technology and high growth stocks can potentially recover. If that is the case, technology and semiconductor sectors are some of the ETFs that may outperform based on the sector rotation model.

Investing in exchange traded funds allows investors affordable access to legacy large-cap firms like AbbVie Inc. (NYSE:ABBV), NVIDIA Corporation (NASDAQ:NVDA), and ServiceNow, Inc. (NYSE:NOW). 

Our Methodology

We tallied the sectors of the 100 most popular stocks among hedge funds and present the 11 most frequently invested sectors by the 920 hedge funds tracked by Insider Monkey in the third quarter of 2022. 

Photo by Mirza Babic on Unsplash

Best Sectors To Invest In Heading Into 2023

11. Telecommunications Equipment

In 2022, the telecom industry faced new opportunities and challenges alike, driven by a dynamic regulatory, technological, and competitive backdrop. The $1 trillion Infrastructure Investment and Jobs Act (IIJA) authorized in November allots $65 billion for ongoing broadband adoption and deployment. The global telecom equipment market was worth $538.9 billion in 2021 and is forecasted to reach $967.9 billion by 2030, indicating a CAGR of 6.9% during the forecast period of 2022 to 2030. 

One of the best telecommunications equipment stocks to invest in according to elite hedge funds is T-Mobile US, Inc. (NASDAQ:TMUS), a Washington-based company that provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. The company also offers wireless devices, including smartphones, wearables, tablets, and other mobile communication devices. For full-year 2022, T-Mobile US, Inc. (NASDAQ:TMUS)’s postpaid net customer additions are expected to be between 6.2 million and 6.4 million, an increase from the prior guidance of 6.0 million to 6.3 million.

Tigress Financial analyst Ivan Feinseth on November 15 raised the price target on T-Mobile US, Inc. (NASDAQ:TMUS) to $202 from $195 and reiterated a Buy rating on the shares. The company’s growing ability to leverage its “massive “5G high-speed network will continue to drive increasing customer gains and revenue growth”, the analyst told investors in a research note. The analyst said T-Mobile US, Inc. (NASDAQ:TMUS)’s leadership position in 5G continues to support “industry-leading postpaid service revenue and cash flow growth.”

According to Insider Monkey’s Q3 data, 100 hedge funds were long T-Mobile US, Inc. (NASDAQ:TMUS), compared to 96 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the largest position holder in the company, with a stake worth $703.3 million. 

Like AbbVie Inc. (NYSE:ABBV), NVIDIA Corporation (NASDAQ:NVDA), and ServiceNow, Inc. (NYSE:NOW), T-Mobile US, Inc. (NASDAQ:TMUS) is one of the stocks favored by elite hedge funds. 

In its Q4 2021 investor letter, ClearBridge Investments shared its stance on T-Mobile US, Inc. (NASDAQ:TMUS):

“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile. Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”

10. Internet and Information Services

Internet and Information Services is one of the best sectors to invest in heading into 2023. The global IT services market grew from $3,471.35 billion in 2021 to $3,938.75 billion in 2022 at a compound annual growth rate of 13.5%. The market is forecasted to reach $5,905.09 billion in 2026 at a CAGR of 10.7%. Financial services, retail and wholesale, manufacturing, and healthcare are some end-user markets for the Internet and Information Services industry.

One of the best information services stocks to invest in according to smart investors includes S&P Global Inc. (NYSE:SPGI), a provider of credit ratings, benchmarks, analytics, and workflow solutions in the global capital, commodity, and automotive markets. It operates in six divisions – S&P Global Ratings, S&P Dow Jones Indices, S&P Global Commodity Insights, S&P Global Market Intelligence, S&P Global Mobility, and S&P Global Engineering Solutions. Year-to-date as of October 27, the company has completed $11 billion of its $12 billion accelerated share repurchase program and expects to launch the remaining $1 billion of the ASR in December 2022. 

On December 2, BMO Capital analyst Jeffrey Silber raised the price target on S&P Global Inc. (NYSE:SPGI) to $400 from $393 and maintained an Outperform rating on the shares. The analyst lifted his FY23 EPS view to $12.00 to $11.66 after its Investor Day presentation and S&P Global Inc. (NYSE:SPGI)’s numerous growth drivers, including higher use of technology, demand for risk solutions, and sustainability.

According to Insider Monkey’s third quarter database, S&P Global Inc. (NYSE:SPGI) was part of 90 hedge fund portfolios, compared to 84 in the prior quarter. Chris Hohn’s TCI Fund Management is the biggest position holder in the company, with 8.7 million shares worth $2.6 billion. 

Baron Funds made the following comment about S&P Global Inc. (NYSE:SPGI) in its Q3 2022 investor letter:

“Shares of rating agency and data provider S&P Global Inc. (NYSE:SPGI) fell 9% during the third quarter due to continued weak debt issuance activity and headwinds to the Indices business from equity market declines. Credit markets were exceptionally soft during the quarter with non-financial corporate bond issuance down 36% for investment grade and down 84% for high yield, reflecting greater investor risk aversion, rising interest rates, and a drop-off in M&A activity. We believe this ratings weakness is temporary and diversification benefits from the acquisition of IHS Markit should support earnings growth next year. Over the long term, the company should continue benefiting from the secular trends of increasing bond issuance, growth in passive investing, and demand for data and analytics, while enjoying meaningful and durable competitive advantages that, in our view, are only strengthening following the merger with IHS Markit.”

9. Catalog/Specialty Distribution 

Catalog/Specialty Distribution is one of the top sectors to look out for in 2023. One of the premier stocks in the industry is Amazon.com, Inc. (NASDAQ:AMZN), a technology conglomerate that engages in the retail sale of consumer products and subscriptions in North America and internationally. The company operates through three segments – North America, International, and Amazon Web Services. On November 30, Amazon Web Services announced that it will likely keep hiring in 2023 and construct new data centers despite a hiring freeze at the rest of the company.

On December 1, Cowen analyst John Blackledge raised the price target on Amazon.com, Inc. (NASDAQ:AMZN) to $160 from $150 and kept an Outperform rating on the shares. The analyst said he expects lower operating losses excluding AWS and Advertising in 2023 as cost headwinds normalize.

Among the hedge funds tracked by Insider Monkey, 269 funds reported owning stakes worth $34.6 billion in Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q3 2022, compared to 252 funds in the prior quarter worth $30 billion. Ken Fisher’s Fisher Asset Management held the largest stake in the company, with approximately 50 million shares worth $5.6 billion. 

L1 Capital International made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2022 investor letter:

“Quarterly results (mostly reported in late July and early August) were generally in line with our expectations. Solid company execution was subsequently swamped by increases in interest rates and hawkish Federal Reserve commentary. During the quarter, only one company (Amazon.com) made a positive contribution of more than 0.5% in Australian dollars. Amazon.com, Inc. (NASDAQ:AMZN) was the largest negative contributor in the June 2022 quarter, with the share price recovering modestly but it is still well below our view of fair value. No company detracted more than 0.5% from the Fund’s performance in Australian dollars, although the depreciation of the Australian dollar obfuscates some meaningful share price falls in U.S. dollars

We did not participate in the ‘unprofitable tech bubble’, but our portfolio does have significant exposure to some of the largest, highly profitable and incredibly financially strong technology companies which dominate their markets and have outstanding medium to long term growth prospects – including Alphabet, Amazon, Intuit and Microsoft. The share price of these companies has now fallen to levels we now consider to provide very attractive valuations for long term investors.”

8. Oil & Gas Production 

The Oil & Gas Production industry reported all-time high profits in 2022, offering sufficient cash flow to finance their operations in 2023. While oil and gas companies understand the geopolitical and macroeconomic backdrop they will be faced with in the year ahead, they understand that the transition to cleaner energy in the long term is inevitable. OPEC expects global oil demand to rise in 2023 but at a slower pace than 2022. OPEC forecasts demand to increase by 2.7 million barrels per day (bpd), or 2.7%, in 2023.

According to smart investors, Exxon Mobil Corporation (NYSE:XOM) is one of the leading oil and gas stocks to consider for a balanced portfolio. Q3 2022 was the most lucrative quarter for Exxon Mobil Corporation (NYSE:XOM), as net income came in at $19.66 billion, revenues surged 52% year-over-year to $112.07 billion, and the company raised its quarterly dividend by 3.4% to $0.91 per share.

On November 22, Citi analyst Alastair Syme raised the price target on Exxon Mobil Corporation (NYSE:XOM) to $110 from $98 and reaffirmed a Neutral rating on the shares. The market rotation into energy equities has “further to run, even though names in our US coverage already sit at all-time highs,” the analyst told investors. History suggests that energy firms usually perform well in an earnings recession, which is Citi’s base-case for 2023, wrote the analyst.

According to Insider Monkey’s data, 75 hedge funds were bullish on Exxon Mobil Corporation (NYSE:XOM) at the end of September 2022, compared to 72 funds in the earlier quarter. Rajiv Jain’s GQG Partners is the biggest position holder in the company, with 33.8 million shares worth nearly $3 billion. 

In its Q2 2022 investor letter, First Eagle Investments, an asset management firm, highlighted a few stocks and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here is what the fund said:

“Integrated oil and gas giant Exxon Mobil Corporation (NYSE:XOM) performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industry wide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”

7. Major Banks

As the global economy remains fragile heading into 2023, with high risk of stagflation or a mild recession, the effects will be felt across the banking industry as well. However, large, well-capitalized, and diversified banks should survive the market volatility relatively well. One of such banks is JPMorgan Chase & Co. (NYSE:JPM), which operates worldwide through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. 

On November 30, JPMorgan Chase & Co. (NYSE:JPM) announced that it is seeking to expand its retirement products in China, the world’s second largest economy, as China officially launched its private pension system last week. 

Citi analyst Keith Horowitz on October 17 reiterated a Buy rating on JPMorgan Chase & Co. (NYSE:JPM) with a $135 price target following the company’s Q3 results. The analyst said the bank is “hitting on all cylinders” and that present share levels offer an “excellent entry point” for a “quality franchise.”

According to Insider Monkey’s data, JPMorgan Chase & Co. (NYSE:JPM) was part of 110 hedge fund portfolios at the end of Q3 2022, compared to 104 in the earlier quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held a prominent stake in the company, comprising 7.5 million shares worth $788 million. 

Here is what Vltava Fund has to say about JPMorgan Chase & Co. (NYSE:JPM) in its Q3 2022 investor letter:

“We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.

JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.

A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.”

6. Business Services

The global business support services market grew from $561.32 billion in 2021 to $621.03 billion in 2022 at a compound annual growth rate of 10.6%. The business support services market is expected to reach $835.66 billion in 2026, indicating a CAGR of 7.7%. Business-to-business, social, and business-to-consumer are the three main categories of business services. It is one of the best sectors to invest in heading into 2023. 

Visa Inc. (NYSE:V), an American financial technology company offering transaction processing, clearing, and settlement of payment transactions, is one of the best business services stocks to monitor. On November 25, Visa Inc. (NYSE:V) reported that its U.S. payments volume in November increased 9% from a year ago, even after the company suspended its operations in Russia in March 2022, and the volume was up 10% in October 2022. 

On December 2, Wells Fargo analyst Donald Fandetti raised the price target on Visa Inc. (NYSE:V) to $250 from $225 and maintained an Overweight rating on the shares. The analyst believes Visa Inc. (NYSE:V) is becoming even more involved in the global money movement ecosystem with its new products, making it harder to disintermediate them in any significant way, the analyst told investors. He thinks Visa Inc. (NYSE:V) can still deliver 20% EPS growth for the foreseeable future.

According to Insider Monkey’s Q3 data, 165 hedge funds were bullish on Visa Inc. (NYSE:V), compared to 166 funds in the last quarter. Terry Smith’s Fundsmith LLP is a prominent stakeholder of the company, with 5.6 million shares worth $1 billion.

In addition to AbbVie Inc. (NYSE:ABBV), NVIDIA Corporation (NASDAQ:NVDA), and ServiceNow, Inc. (NYSE:NOW), smart investors are piling into Visa Inc. (NYSE:V) heading into 2023. 

Baron Funds made the following comment about Visa Inc. (NYSE:V) in its Q3 2022 investor letter:

“Shares of global payment network Visa Inc. (NYSE:V) fell despite reporting financial results that beat Street forecasts and sustained volume growth in recent months. Revenue grew 19% and EPS grew 33% in the most recent quarter, and double-digit payment volume growth persisted through August. Share price weakness represented a reversal of outperformance earlier this year and may be due to foreign exchange headwinds and concerns about a potential weakening of consumer spending. We continue to own the stock due to Visa’s long runway for growth and significant competitive advantages.”

5. Medical Specialties 

Medical Specialties is one of the best sectors to invest in heading into next year. The COVID-19 pandemic accelerated healthcare transformation by at least a decade, and the industry will continue to evolve in the future, creating unique investment opportunities. One of the top stocks in the medical specialties industry favored by elite investors is AbbVie Inc. (NYSE:ABBV), a company that discovers, develops, and manufactures pharmaceuticals worldwide. 

On October 28, AbbVie Inc. (NYSE:ABBV) declared a $1.48 per share quarterly dividend, a 5% increase from its prior dividend of $1.41. The dividend is payable on February 15, 2023 to shareholders of record on January 3. The dividend yield on December 5 came in at 3.61%. 

Credit Suisse analyst Trung Huynh on November 17 initiated coverage of AbbVie Inc. (NYSE:ABBV) with an Outperform rating and a $170 price target, calling it one of his two top ideas on a relative basis among the U.S. large-cap biopharma peer group. 

According to Insider Monkey’s data, 80 hedge funds were long AbbVie Inc. (NYSE:ABBV) at the end of the third quarter of 2022, compared to 71 funds in the earlier quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held a significant stake in the company, comprising 3.2 million shares worth $431.60 million. 

Here is what Baron Funds specifically said about AbbVie Inc. (NYSE:ABBV) in its Q3 2022 investor letter:

“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”

4. EDP Services

Electronic data processing (EDP) services is one of the best sectors to invest in heading into next year. Electronic data processing refers to the gathering of data using electronic devices, and it is another term for automatic information processing. One of the most prominent EDP stocks that elite hedge funds are buying is ServiceNow, Inc. (NYSE:NOW), which is a California-based company that offers enterprise cloud computing solutions that define, structure, consolidate, and automate services for enterprises worldwide. 

On November 17, Morgan Stanley analyst Keith Weiss said he is convinced that ServiceNow, Inc. (NYSE:NOW)’s workflow automation platform “hits a sweet spot” with organizations seeking to optimize their business processes and that the company has “strong positioning” to cater to a $175 billion market opportunity. This view, paired with what he calls its “best in class unit economics,” reiterates his confidence in ServiceNow, Inc. (NYSE:NOW) being able to see resilient 30%-plus free cash flow growth in FY23/FY24, added the analyst, who also named ServiceNow as his “Top Pick”, replacing Salesforce, Inc. (NYSE:CRM). He maintained an Overweight rating and a $520 price target on ServiceNow, Inc. (NYSE:NOW) shares.

According to Insider Monkey’s Q3 data, 103 hedge funds were bullish on ServiceNow, Inc. (NYSE:NOW), compared to 99 funds in the preceding quarter. Chase Coleman’s Tiger Global Management is the biggest stakeholder of the company, with 1.7 million shares worth nearly $640 million. 

Lakehouse Capital made the following comment about ServiceNow, Inc. (NYSE:NOW) in its Q3 2022 investor letter:

“Despite a challenging environment, US-based software company ServiceNow, Inc. (NYSE:NOW) performed well and reported revenues of $1.8 billion for the quarter, up 29% year-over-year in constant currency terms. The company’s operational metrics continue to be resilient, with remaining performance obligations growing 25% year-on-year in constant currency terms, total customers with over $1 million in annual contract value (ACV) growing 22%, and renewal rates holding firm at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal, which had its best quarter ever including a $20 million-plus net new ACV win. The company now boasts 1,530 customers generating in excess of $1 million in ACV, which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. We continue to believe that ServiceNow is one the highest quality software businesses around as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”

3. Biotechnology: Pharmaceutical Preparation 

The global pharmaceutical market is worth approximately $1.25 trillion. The pharmaceutical manufacturing market is forecasted to grow at a CAGR of around 15.9% from 2022 to 2030 and expected to be worth around $1,599.9 Billion by 2030. Among the hedge funds tracked by Insider Monkey, Pfizer Inc. (NYSE:PFE) is one of the most prominent biotechnology stocks to invest in.  

On December 9, Pfizer Inc. (NYSE:PFE) declared a $0.41 per share quarterly dividend, a 2.5% increase from its prior dividend of $0.40. The dividend is distributable on March 3, 2023 to shareholders of record on January 27, 2023. The dividend yield on December 12 came in at 3.09%. 

Credit Suisse analyst Trung Huynh on November 17 initiated coverage of Pfizer Inc. (NYSE:PFE) with an Outperform rating and a $55 price target. Pfizer Inc. (NYSE:PFE) has been “impacted adversely” following its COVID vaccine success, but the analyst said his Outperform thesis is not hinged on a single asset, but a combination of pipeline improvements that support growth. 

According to Insider Monkey’s data, 77 hedge funds were bullish on Pfizer Inc. (NYSE:PFE) at the end of September 2022, compared to 70 funds in the earlier quarter. Cliff Asness’ AQR Capital Management is the largest stakeholder of the company, with 10.6 million shares worth $467.5 million. 

Diamond Hill Capital made the following comment about Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter:

“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”

2. Semiconductors

Deloitte expects the global semiconductor industry to grow 10% in 2022 to over $600 billion for the first time ever, despite the shortages in the industry resulting in revenue misses of more than $500 billion this year worldwide. NVIDIA Corporation (NASDAQ:NVDA) is one of the top semiconductor stocks favored by elite hedge funds. 

On December 8, Tigress Financial analyst Ivan Feinseth reiterated a Buy recommendation on NVIDIA Corporation (NASDAQ:NVDA) but lowered the price target on the shares to $250 from $310, citing a re-rating of valuation. His revised target represents a potential return of more than 55% from present levels, noted the analyst, who sees NVIDIA Corporation (NASDAQ:NVDA)’s “industry-leading” position in Artificial Intelligence and several new products and partnerships allowing it to overcome short-term headwinds and position it for a new business upcycle.

According to Insider Monkey’s Q3 data, NVIDIA Corporation (NASDAQ:NVDA) was part of 89 hedge fund portfolios, compared to 84 in the prior quarter. Ken Fisher’s Fisher Asset Management is a prominent stakeholder of the company, with more than 12 million shares worth $1.5 billion.  

Vulcan Value Partners made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2022 investor letter:

“We also sold NVIDIA Corporation (NASDAQ:NVDA) during the quarter to allocate capital to new purchases and to add to existing positions in the portfolio. NVIDIA is facing multiple headwinds. Data center revenue growth is slowing, gaming revenue growth is declining, and the United States has issued new export controls to China that impact NVDIA’s products. We believe NVDIA’s competitive advantages are intact, and it remains on our MVP list. In the right circumstances we would be delighted to own it in the future.”

1. Computer Software: Prepackaged Software

Prepackaged software is one of the best sectors to watch in 2023. Intuit Inc. (NASDAQ:INTU) is a California-based company that provides financial management and compliance products and services for consumers, small businesses, and accounting professionals in the United States, Canada, and internationally. The company operates through four segments – Small Business & Self-Employed, Consumer, Credit Karma, and ProConnect. It is one of the best prepackaged software stocks to invest in. 

On November 29, Intuit Inc. (NASDAQ:INTU) declared a $0.78 per share quarterly dividend, in line with previous. The dividend is distributable on January 18, 2023. The company also reported fiscal Q1 2023 earnings and revenue that came in above Wall Street expectations. 

Argus analyst Jim Kelleher on December 1 kept a Buy rating and a $580 price target on Intuit Inc. (NASDAQ:INTU) after its Q1 results. Earnings and revenue outperformed consensus given strength in the Small Business & Self Employed Group, and despite further weakening at Credit Karma, management reaffirmed its forecast for mid-teens EPS growth in FY23, the analyst told investors. The stock has fallen sharply, but Intuit Inc. (NASDAQ:INTU)’s fundamentals remain solid, which point towards the underlying value in the stock, the analyst contended.

According to Insider Monkey’s third quarter database, 86 hedge funds were long Intuit Inc. (NASDAQ:INTU), compared to 75 funds in the preceding quarter. Henry Ellenbogen’s Durable Capital Partners is a leading position holder in the company, with 1.70 million shares worth $660 million. 

Here is what RiverPark Large Growth Fund has to say about Intuit Inc. (NASDAQ:INTU) in its Q3 2022 investor letter:

“We took advantage of its 2022 price decline to add a small position in Intuit. INTU is a leading SaaS software solutions provider to small businesses, consumers, and professional accountants, best known for its QuickBooks accounting and TurboTax tax preparation platforms. INTU recently strengthened its personal finance offerings with the acquisitions of Mint and Credit Karma, and its small business offering with the acquisition of email marketing platform Mailchimp. The company is benefitting from the secular shift to digitization for both businesses and consumers. Given its vast amount of valuable personal finance and tax customer data from its 100 million + customer installed base, the company can apply artificial intelligence to the data to generate actionable intelligence for customers, as well as a large cross-selling opportunity across its products.

Given INTU’s less than 5% penetration of its $300 billion market, we believe the company can grow its top-line mid-teens, while improving its high-margin business model of greater than 80% gross margins and greater than 35% EBITDA margin, leading to high-teens EPS growth for the foreseeable future. At about 2% of revenue, the company also requires limited capital expenditures, producing significant and growing FCF, which INTU has used for acquisitions, a small dividend, debt repayment and stock buybacks.”

You can also take a look at 10 Best Transportation Stocks To Buy and 11 Best ADR Stocks To Buy. 

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Disclosure: None. 11 Best Sectors To Invest In Heading Into 2023 is originally published on Insider Monkey.