In this article, we discuss 10 stocks that can begin to rebound in 2023. If you want to see more stocks in this group, check out 5 Stocks That Can Begin to Rebound in 2023.
Even though recession fears were mounting until the end of July, investors have not put much stock into the broader market sentiment of late, spurring an ongoing rally in equities. The S&P 500 rose 9.1% in July despite the pressured economic data, the best monthly performance for the index in about two years. Despite investors feeling optimistic, second-quarter GDP declined, which marks two consecutive quarters of deteriorating U.S. growth.
According to Goldman Sachs, household income will grow after Christmas following a year-long decline, and the higher cash flow will continue in the next year. The higher income will reverse about 4.2% of the drop in household discretionary income, supported by higher wages. Mark Zandi, chief economist at Moody’s Analytics, has a similar outlook on consumer spending and believes that retail sales will improve after their battle with inflation in the last year. “Cash flow got hit during 2022 but it’s coming back, and cash flow is what drives spending”, as per Zandi.
Consumer cash flow will increase by 2% in the first quarter of 2023 according to Goldman Sachs’ data, and climb to more than 6% in the second half of 2023, which represents an overall gain of approximately $600 billion. Goldman consumer goods analyst Jason English said in a recent press webinar:
“If we’re cleared by the holidays, we’re in much better shape going forward than the market is currently estimating.”
If consumer spending improves, sectors that are down due to persistent inflation, including materials, construction, and real estate, as well as other discretionary sectors, will continue to improve and recover. Some of the most prominent stocks that can begin to rebound in 2023 include Tesla, Inc. (NASDAQ:TSLA), Booking Holdings Inc. (NASDAQ:BKNG), and The Home Depot, Inc. (NYSE:HD).
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
We selected stocks that were hit hard in 2022 but which are expected to rebound in 2023, including materials, technology, travel, and construction names. We have mentioned the analyst ratings, hedge fund sentiment, latest earnings, and dividend news for each of the securities.
The list is ranked according to the hedge fund sentiment around the stocks, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds that filed 13Fs for the quarterly reporting period.
Stocks That Can Begin to Rebound in 2023
10. Eagle Materials Inc. (NYSE:EXP)
Number of Hedge Fund Holders: 22
YTD Share Price Decline as of August 29: 26.68%
Eagle Materials Inc. (NYSE:EXP) is a Texas-based company that manufactures and distributes construction and building materials in the United States. It operates through four segments – Cement, Concrete and Aggregates, Gypsum Wallboard, and Recycled Paperboard.
Raymond James analyst Patrick Tyler Brown initiated coverage of Eagle Materials Inc. (NYSE:EXP) with an ‘Outperform’ rating and $145 price target on August 18. The analyst thinks the outlook for the U.S. wallboard sector could turn out better than the market expects, even in light of a weak housing market. The stock has plunged about 27% year-to-date as of August 29, but it could begin to rebound in 2023 as market pressures ease.
On August 9, Eagle Materials Inc. (NYSE:EXP) declared a quarterly dividend of $0.25 per share, in line with previous. The dividend is payable on October 14, to shareholders of record on September 16.
According to the second quarter database of Insider Monkey, 22 hedge funds were long Eagle Materials Inc. (NYSE:EXP) with stakes worth $107 million, compared to 28 positions in the prior quarter worth $130 million. Ken Griffin’s Citadel Investment Group is the leading shareholder in the company, with 183,884 shares valued at $20.2 million.
Like Tesla, Inc. (NASDAQ:TSLA), Booking Holdings Inc. (NASDAQ:BKNG), and The Home Depot, Inc. (NYSE:HD), Eagle Materials Inc. (NYSE:EXP) is one of the stocks which can potentially rebound in 2023.
Here is what L1 Capital International Fund had to say about Eagle Materials Inc. (NYSE:EXP) in its Q4 2021 investor letter:
“Adjustments to the portfolio were relatively modest and centered on some of the smaller positions. Within the Top 10 holdings, there were two additions and two exits, although both companies that exited the Top 10 remain meaningful positions. Eagle Materials returned to the Top 10 due to relative outperformance, with the share price increasing 27% (in USD). Eagle Materials is one of the portfolio’s businesses exposed to the U.S. new residential, repair and renovation and infrastructure sectors, all of which have a robust outlook.”
9. Martin Marietta Materials, Inc. (NYSE:MLM)
Number of Hedge Fund Holders: 39
YTD Share Price Decline as of August 29: 20.46%
Martin Marietta Materials, Inc. (NYSE:MLM) was founded in 1939 and is headquartered in Raleigh, North Carolina. It is a natural resource-based building materials company catering to the construction industry in the United States and internationally. On July 28, Martin Marietta Materials, Inc. (NYSE:MLM) reported Q2 non-GAAP EPS of $3.96, topping analysts’ estimates by $0.18. The company’s revenue of $1.64 billion climbed 18.8% year-over-year and outperformed the market consensus by $60 million.
On August 10, Martin Marietta Materials, Inc. (NYSE:MLM) declared a $0.66 per share quarterly dividend, an 8.2% increase from its prior dividend of $0.61. The dividend is distributable on September 30, to shareholders of record on September 1.
Raymond James analyst Patrick Tyler Brown upgraded Martin Marietta Materials, Inc. (NYSE:MLM) to ‘Outperform’ from ‘Market Perform’ with a $410 price target on August 18. Multiple recent headwinds for the company “could flip to tailwinds into 2023 and beyond, possibly ahead of what the market appreciates”, the analyst told investors in a research note. The pricing for aggregates into 2023 already supports higher year-over-year price gains even before considering any additional pricing actions in the market, added the analyst.
According to Insider Monkey’s data, 39 hedge funds were bullish on Martin Marietta Materials, Inc. (NYSE:MLM) at the end of Q2, compared to 35 funds in the earlier quarter. Select Equity Group is the leading position holder in the company, with roughly 4 million shares worth $1.19 billion.
Here is what the Weitz Investment Management Partners Value Fund had to say about Martin Marietta Materials, Inc. (NYSE:MLM) in its Q4 2021 investor letter:
“Martin Marietta Materials is one of the Fund’s largest quarterly contributors due to solid results and bright outlooks for their prosaic, essential products. Aggregate volumes and backlogs are strong across end markets, pricing momentum is robust, and the federal infrastructure bill adds visibility into the amount of money that will be allocated to infrastructure projects.”
8. RingCentral, Inc. (NYSE:RNG)
Number of Hedge Fund Holders: 42
YTD Share Price Decline as of August 29: 78.19%
RingCentral, Inc. (NYSE:RNG) is a California-based SaaS provider that allows businesses in North America to communicate and collaborate. On August 2, RingCentral, Inc. (NYSE:RNG) reported Q2 non-GAAP EPS of $0.45, exceeding market estimates by $0.04. The company’s revenue of $487 million grew by 28.4% year-over-year, and topped Wall Street’s consensus by $4.9 million. The stock climbed about 10% on August 3 following the earnings release, supported by subscription revenue jumping 32% year-over-year to $463 million.
MKM Partners analyst Catharine Trebnick assumed coverage of RingCentral, Inc. (NYSE:RNG) on August 4, issuing a ‘Buy’ rating and an $80 price target on the stock. The company provides investors “high-visibility, multi-year stable revenue growth in a large, under-penetrated market”, the analyst told investors. The analyst said a strong competitive advantage and a “robust” communications platform positions RingCentral, Inc. (NYSE:RNG) to gain from the hybrid work-from-anywhere business model.
According to Insider Monkey’s data, 42 hedge funds were long RingCentral, Inc. (NYSE:RNG) at the end of June 2022, compared to 43 funds in the preceding quarter. Alkeon Capital Management is the leading stakeholder of the company, with 3.7 million shares worth $193 million.
Here is what the RiverPark Large Growth Fund had to say about RingCentral, Inc. (NYSE:RNG) in its Q4 2021 investor letter:
“RingCentral: Despite reporting strong and accelerating revenue growth and profitability throughout the year, RNG shares sold off on concerns of increased competition from Zoom and Microsoft. We believe RingCentral’s partnerships, including with Avaya, Atos, Alcatel, Vodafone, and most recently Mitel provide a sales advantage to help drive 30%+ revenue growth for the next five years. For its 3Q21, RNG reported key metrics above the high-end of its guidance—subscription revenue grew 38%, annual recurring revenue growth accelerated to 42%, total revenue grew 37% and RNG’s 10.5% Non-GAAP Operating margin exceeded guidance by 50 basis points. Management also again raised 2021 subscription revenue growth guidance to 32%.
RingCentral is the largest and fastest growing pure play Unified Communications as a Service (UCaaS) vendor. Traditionally, business communications have been on-premises hardware-based private branch exchanges (PBX), which primarily support voice-only desktop phones. These systems do not support employees who now communicate from anywhere with any device, using voice, video, text, messaging, and social media. UCaaS encompasses solutions addressing all these needs in a capital and labor light model for customers. RNG is the UCaaS market leader with two million users in an extremely fragmented market and is growing rapidly. The company started in the small-and-medium business market and has migrated to also serving larger enterprises, helped by new channel partnerships. The company’s increasing scale from its growing recurring revenue should improve operating margins, allowing the company to achieve its long-term target of 20%-25%.”
7. MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Holders: 46
YTD Share Price Decline as of August 29: 26.21%
MGM Resorts International (NYSE:MGM) is a Las Vegas-based company that operates casino, hotel, and entertainment resorts in the United States and Macau. The company reported Q2 GAAP EPS of $4.20 and revenue of $3.26 billion, the latter up 43.6% year-over-year and outperforming estimates by $230 million. The company repurchased $1.1 billion of common stock during the June quarter, which accounts for about 8% of the outstanding shares. The stock is down about 26% year-to-date as of August 29, but with tourism returning to pre-pandemic levels, it can potentially rebound in 2023.
On August 4, Deutsche Bank analyst Carlo Santarelli raised the price target on MGM Resorts International (NYSE:MGM) to $51 from $48 and kept a ‘Buy’ rating on the shares after the “strong” Q2 results.
According to Insider Monkey’s data, 46 hedge funds were long MGM Resorts International (NYSE:MGM) at the end of Q2, compared to 59 funds in the prior quarter. Keith Meister’s Corvex Capital is the leading shareholder of the company, with 6.67 million shares worth $193 million.
Here is what the Baron Real Estate Fund had to say about MGM Resorts International (NYSE:MGM) in its Q1 2022 investor letter:
“At this stage, we believe several public real estate companies offer compelling long-term return prospects that, in some cases, may include a trifecta combination of growth, dividends, and an improvement in valuation. Examples of public real estate companies that are attractively valued includes: MGM Resorts International. Leading global casino and entertainment company. At its recent price of $40 per share, we believe the company is valued at a significant discount to our reasonable $60 per share estimate of the sum-of-the-parts value of its business.”
6. Bill.com Holdings, Inc. (NYSE:BILL)
Number of Hedge Fund Holders: 46
YTD Share Price Decline as of August 29: 29.74%
Bill.com Holdings, Inc. (NYSE:BILL) is a California-based software company that digitizes and automates back-office financial operations for small and medium-sized businesses worldwide. On August 18, Bill.com Holdings, Inc. (NYSE:BILL) reported suffering a fiscal Q4 non-GAAP loss per share of $0.03, beating estimates by $0.11. Its revenue of $200 million was up 156% year-over-year and also outperformed the market consensus, by $17.1 million.
Wells Fargo analyst Jeff Cantwell raised the price target on Bill.com Holdings, Inc. (NYSE:BILL) to $230 from $200 on August 19 and maintained an ‘Overweight’ rating on the shares. The company’s Q4 results reflect excellent operating momentum, which is exceeding investor expectations, the analyst said in a research note. He added that Bill.com Holdings, Inc. (NYSE:BILL)’s FY23 revenue guidance was higher than the buy-side’s expectations and reflects expected growth of 49% to 52%.
According to Insider Monkey’s Q2 data, 46 hedge funds were long Bill.com Holdings, Inc. (NYSE:BILL) on June 30, compared to 58 funds in the earlier quarter. Colin Moran’s Abdiel Capital Advisors is the leading position holder in the company, with almost 2 million shares worth $219 million.
In addition to Tesla, Inc. (NASDAQ:TSLA), Booking Holdings Inc. (NASDAQ:BKNG), and The Home Depot, Inc. (NYSE:HD), Bill.com Holdings, Inc. (NYSE:BILL) is one of the stocks on the radar of smart investors as the market continues its rally.
Here is what the Alger Mid Cap Focus Fund had to say about Bill.com Holdings, Inc. (NYSE:BILL) in its Q4 2021 investor letter:
“Bill.com Holdings, Inc., was among the top detractors from performance. Bill.com provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and medium size businesses. Its software helps customers to generate and process invoices, streamline approvals, send and receive payments, synchronize data with their accounting system and manage their cash.”
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Disclosure: None. 10 Stocks That Can Begin to Rebound in 2023 is originally published on Insider Monkey.