In this article, we will be taking a look at Jim Cramer’s top stock picks for 2023.
According to a CNBC article published this February, Cramer believes that the Federal Reserve was inching closer to beating inflation, despite what Wall Street thinks. The US economy has been in a state of downturn, making the market highly vulnerable and investors more cautious about investing in new companies.
Cramer has still named stocks like Netflix, Inc. (NASDAQ:NFLX), Meta Platforms, Inc. (NASDAQ:META), and Advanced Micro Devices, Inc. (NASDAQ:AMD) as some of the options investors should consider for their portfolios this year, considering his own optimism regarding the market. He has added that price stability is just around the corner, and while some weaker companies will most likely never be able to recover, high-end companies will manage to survive.
While the Federal Reserve does not seem to be relenting entirely when it comes to interest rates, the hikes have gotten smaller.
Let’s now take a look at Jim Cramer’s top stock picks for 2023.
Our Methodology
We have selected 10 stocks that have been named by Jim Cramer on CNBC’s Mad Money this January as his top picks for 2023. We have also mentioned analyst ratings for these stocks, ensuring they are positive. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.
Jim Cramer’s Top Stock Picks for 2023
10. Stanley Black & Decker Inc (NYSE:SWK)
Number of Hedge Fund Holders: 26
Stanley Black & Decker, Inc. is an industrial machinery company based in New Britain, Connecticut. It operates in the US, Canada, the rest of the Americas, France, the rest of Europe, and Asia. The company offers products like professional-grade corded and cordless electric power tools and equipment.
On February 5, Barclay analyst Julian Mitchell reiterated an Overweight rating on Stanley Black & Decker, Inc. shares.
This January, Jim Cramer recommended that investors should start a small position in Stanley Black & Decker, Inc. in 2023 and gradually buy more. He believes that the stock will continue to see gains in 2023 after its performance last year. Revenues for Stanley Black & Decker, Inc. have increased by almost 70% over the past ten years. The stock’s most attractive quality, however, is its status as a dividend king, with a record of 55 years of dividend increases. It has a yield of 3.59% as of February 14.
Greenhaven Associates was the largest stakeholder in Stanley Black & Decker, Inc. in the fourth quarter, holding 1.3 million shares. In the third quarter, 26 hedge funds were long the stock, with a total stake value of $447 million.
Ariel Investments, an investment management company, mentioned Stanley Black & Decker, Inc. in its third-quarter 2022 investor letter. Here’s what the firm said:
“Shares of Stanley Stanley Black & Decker, Inc. (NYSE:SWK) sharply declined in the quarter as inflation and rapidly rising rates drove a swift deterioration in consumer demand. In response, SWK is laser-focused on reducing inventory to generate cash flow and re-sizing the cost base through simplifying its corporate structure, optimizing operations and transforming the supply chain. Though the macroeconomic backdrop remains challenging, we have conviction in SWK’s experienced executive management team and think the balance sheet is well-positioned to weather the storm. At current levels, SWK is trading at a substantial, historically-high discount to our estimate of private market value.”
Stanley Black & Decker, Inc., like Netflix, Inc., Meta Platforms, Inc., and Advanced Micro Devices, Inc., is among Jim Cramer’s top stock picks for 2023.
9. American Electric Power Company, Inc. (NYSE:AEP)
Number of Hedge Fund Holders: 35
American Electric Power Company, Inc. (NYSE:AEP) is a utility company based in Columbus, Ohio. The company engages in the generation, transmission, and distribution of electricity for sale in the US.
Neil Kalton at Wells Fargo holds an Equal Weight rating on American Electric Power Company, Inc. shares as of February 1.
In January, Cramer named American Electric Power Company, Inc. as one of the stocks he believes to be a worthwhile addition to investors’ portfolios. He likes the stock because the company is well-run, and utility companies are known to perform well in an economic downturn. American Electric Power Company, Inc. is also a dividend stock with a 3.64% yield as of February 14 and 13 years of dividend growth. Company management is also guiding for long-term 6%-7% annual operating earnings growth as of this February.
There were 35 hedge funds long American Electric Power Company, Inc. in the third quarter, with a total stake value of $671.3 million.
8. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 46
Northrop Grumman Corporation (NYSE:NOC) is an aerospace and defense company based in Falls Church, Virginia. The company designs and manufactures aircraft systems in the US and internationally. It also offers unmanned autonomous aircraft systems.
An Outperform rating was reiterated on Northrop Grumman Corporation shares on February 6 by Credit Suisse analyst Scott Deuschle.
Jim Cramer this January commented that Northrop Grumman Corporation could be the best defense contracted to own as the Russo-Ukrainian war persists. In the fourth quarter, the company had robust sales growth of 16% year-over-year. Company management expects Northrop Grumman Corporation to see a 20% compound annual growth in its multi-year cash flow outlook, while analysts expected annual EPS growth of 10%-12% in 2024-2025.
There were 46 hedge funds long Northrop Grumman Corporation in the third quarter, and their total stake value in the company was $1.1 billion. Yacktman Asset Management was the largest stakeholder in the company in the fourth quarter, holding 410,428 shares in the company.
LRT Capital Management, an investment management firm, mentioned Northrop Grumman Corporation in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Based in Virginia, Northrop Grumman Corporation (NYSE:NOC) is one of the world’s largest defense contractors with annual revenue more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation the US defense market is now controlled by five large companies: The Boeing Company (BA), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and Raytheon Technologies Corporation (RTX).
Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This industry structure has allowed Northrop to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximate 15x, next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ division submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-35 and F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; and so on…” (Click here to read the full text)
7. Halliburton Company (NYSE:HAL)
Number of Hedge Fund Holders: 48
Halliburton Company (NYSE:HAL) is an energy company based in Houston, Texas. The company operates through its Completion and Production, and Drilling and Evaluation segments. It offers production enhancement services, including stimulation and sand control services, among more.
HSBC analyst Abhishek Kumar holds a Buy rating on Halliburton Company shares as of January 30.
Cramer predicts that Halliburton Company shares have a multi-year rally ahead of them, and he has thus named the stock as one of his top picks for 2023. In the fourth quarter, the company reported a net profit of $656 million, or $0.72 per diluted share, up from $544 million, or $0.6 per share, in the previous quarter. Halliburton Company had a full-year revenue of $20.3 billion, demonstrating an increase of 33% year-over-year.
Our hedge fund data for the third quarter shows 48 hedge funds long Halliburton Company, with a total stake value of $1 billion.
Carillon Tower Advisers, an investment management company, mentioned Halliburton Company in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Halliburton Company (NYSE:HAL) provides equipment and services to the global energy industry. Shares have been on an impressive trajectory recently, outpacing the notable move in the overall oilfield services and equipment group. Halliburton benefits from the ongoing upswing in global upstream spending and should play a pivotal role in helping exploration and production companies navigate the recent productivity declines in North American shale. The tight services and equipment market has resulted in strong pricing gains and margin expansion, and when coupled with a disciplined approach to capital spending, has paved the way for the stock’s outperformance.”
6۔ McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 51
McKesson Corporation (NYSE:MCK) is a healthcare company based in Irving, Texas. The company distributes branded, generic, specialty, biosimilar, and over-the-counter pharmaceutical drugs and other healthcare products.
Morgan Stanley’s Erin Wright holds an Overweight rating on McKesson Corporation shares as of February 2.
Cramer likes McKesson Corporation in 2023 because he believes that stocks of drug distributors tend to perform well during an economic downturn. In the third quarter, the company’s EPS was $6.9, up 12% year-over-year and higher than the consensus estimates of $6.35. Since McKesson Corporation also drastically decreased its operating costs in that quarter, it generated an operating profit of $1.39 billion as well.
Pzena Investment Management was the largest stakeholder in McKesson Corporation in the fourth quarter, holding 973,538 shares. A total of 51 funds were long the stock in the third quarter, with a total stake value of $4.1 billion
Baron Funds, an investment management company, mentioned McKesson Corporation in its third-quarter 2022 investor letter. Here’s what the firm said:
“McKesson Corporation (NYSE:MCK) is a leading distributor of pharmaceuticals and medical supplies. The company also provides prescription technology solutions that connect pharmacies, providers, payers, and biopharmaceutical customers. The stock price rose on solid financial results as its business is less exposed to current macroeconomic headwinds. We continue to have conviction that McKesson can grow earnings per share by an average of 12% to 14% annually and think the stock is still reasonably valued.”
McKesson Corporation, like Netflix, Inc., Meta Platforms, Inc., and Advanced Micro Devices, Inc., is one of the stocks that is expected to perform well through 2023.
5. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 54
Constellation Energy Corporation (NASDAQ:CEG) is a utility company based in Baltimore, Maryland. The company sells natural gas, renewable energy, and other energy-related products and services.
An Overweight rating was reiterated on Constellation Energy Corporation shares on January 31 by Neil Kalton at Wells Fargo.
Cramer said this January that Constellation Energy Corporation will benefit from funding through the Inflation Reduction Act. He also added that the company is the best operator of nuclear plants in the US at present. The company’s third-quarter revenue of $6.05 billion beat estimates by $2.13 billion.
Constellation Energy Corporation was found among the 13F holdings of 54 hedge funds in the third quarter, with a total stake value of $2.3 billion.
Alger Capital, an investment management company, mentioned Constellation Energy Corporation in its third-quarter 2022 investor letter. Here’s what the firm said:
“Constellation Energy Corporation (NASDAQ:CEG) is America’s leading clean energy company, based on carbon-free production. The company is the largest supplier of clean energy and sustainable solutions to homes, businesses, governments, community aggregations, and a range of wholesale customers (such as municipalities, cooperatives, and other end markets) across the continental U.S., backed by approximately 32,400 megawatts of generating capacity consisting of nuclear, wind, solar, natural gas and hydroelectric assets. Constellation produces nearly 10% of the nation’s carbon-free energy.
Shares outperformed during the third quarter primarily due to the Inflation Reduction Act (IRA). Signed into law in august, the bill provides a nuclear production tax credit of approximately $43.75 per megawatt hour of energy generated. This credit favorably impacted earnings, resulting in an increase in Constellation’s share price.”
4. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 59
Enphase Energy, Inc. (NASDAQ:ENPH) is a semiconductor-equipment company based in Fremont, California. The company designs home energy solutions for the solar photovoltaic industry for sale.
Craig-Hallum analyst Eric Stine holds a Buy rating on Enphase Energy, Inc. shares as of February 8.
Cramer has named Enphase Energy, Inc. the “renewable golden boy,” noting that the company is a profitable and solid business in the energy tech sector. The company has reported a financial year of 2022 revenue growth of 42.6%, and expects revenue growth to further increase at a three-year compound annual growth rate of 27.8%.
Our hedge fund data shows 59 funds long Enphase Energy, Inc. in the third quarter. Their total stake value was $2.2 billion.
ClearBridge Investments, an investment management company, mentioned Enphase Energy, Inc. in its third-quarter 2022 investor letter. Here’s what the firm said:
“In IT, Enphase Energy, Inc. (NASDAQ:ENPH) delivered a strong quarter driven by secular growth in global rooftop solar, increased penetration into Europe, where demand accelerated, and a continued ramp up in battery storage sales. Also with a strong presence in the U.S., Enphase Energy designs and manufactures microinverters for residential and small commercial solar PV systems and has made strides in evolving from a solar inverter maker into a “home energy management” company that can act as the brains for the home’s energy system, including microinverters for solar, as well as storage and energy management software.”
3. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 89
Advanced Micro Devices, Inc. is an information technology company based in Santa Clara, California. The company operates through its Computing and Graphics, and Enterprise, Embedded, and Semi-Custom segments.
As of February 1, Morgan Stanley analyst Joseph Moore holds an Overweight rating on Advanced Micro Devices, Inc. shares.
Cramer believes that since Advanced Micro Devices, Inc. performed well in 2022, it will continue this trend in 2023. He believes in the company’s CEO, Lisa Su, and the company’s underlying business. Advanced Micro Devices, Inc. reported share buybacks of $3.7 billion in 2022, and its data center reported a 41% revenue growth year-over-year in the fourth quarter.
Advanced Micro Devices, Inc. had 89 hedge funds long its stock in the third quarter, with a total stake value of $4.9 billion.
2. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 115
Netflix, Inc. is a movies and entertainment company based in Los Gatos, California. It offers TV series, documentaries, feature films, and more on its online streaming platform.
A Buy rating was reiterated on Netflix, Inc. shares on February 8 by Jefferies analyst Andrew Uerkwitz.
Jim Cramer sees Netflix, Inc. as an improving franchise that will appeal to growth-oriented money managers, stating that the company has really turned itself around in the past few years. The company increased its subscribers in 2022 by 7.66 million to 230.75 million between October and December alone, beating the company’s own October guidance.
There were 115 hedge funds long Netflix, Inc. in the third quarter. Their total stake value was $6.7 billion.
Alger Capital, an investment management company, mentioned Netflix, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Netflix, Inc. (NASDAQ:NFLX) provides a subscription-based service for streaming movies and television episodes over the internet. In doing so, it is redefining how people consume entertainment in a rapidly digitizing world. Shares outperformed during the period as the company reported solid third quarter results, driven by net subscription additions that beat expectations. Management also raised fiscal fourth quarter guidance owing to strong customer acquisitions across all regions. Moreover, the company remains optimistic on new monetization efforts around ad pricing within their basic account tier.”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
Meta Platforms, Inc. is a communication services company based in Menlo Park, California. The company engages in the distribution of social media services worldwide.
BofA analyst Justin Post holds a Buy rating on Meta Platforms, Inc. shares as of February 13.
Cramer believes that while Meta Platforms, Inc. performed poorly in 2022, it can mount a comeback this year by either continuing to invest in the metaverse or by diverting its budget to other segments like WhatsApp. On February 1, the company announced a $40 billion share buyback program. The next day, the stock rose from $153 to $197, adding about $100 billion to its market capitalization.
A total of 177 hedge funds were long Meta Platforms, Inc. in the third quarter, with a total stake value of $14.2 billion.
Investment management company Vulcan Value Partners mentioned Meta Platforms, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“During the quarter we sold Meta Platforms, Inc. (NASDAQ:META) after owning the business for over four years. The fundamentals of our investment case were based on the tremendous number of users that spent time on its various properties and the advertising dollars that flowed to the company as a result. We believed its competitive advantage was that the platform was, more or less, a monopoly on people’s time and attention. The rise of TikTok and other emerging platforms has given us pause on the company’s ability to maximize that advantage. From our perspective, the idea of “one platform to rule them all” may now be a thing of the past as social offerings have become more fragmented.
In addition, though our research has indicated that much of the initial damage done from Apple’s iOS 14.5 privacy changes has been repaired, we remain concerned with Apple’s influence over the digital advertising ecosystem. Apple is one of the largest gatekeepers to Meta’s mobile services, and it has become more difficult for us to gauge the pace of change emerging from Apple relating to privacy, as well as evaluating Apple’s ambitions in advertising…” (Click here to read the full text)
See also Jim Cramer’s Recession-Proof Stocks and 14 Best Stocks To Buy Before A Recession.
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- 13 Most Profitable Large Cap Stocks
This article is originally published at Insider Monkey.
