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Todd Carlisle avatar
Todd Carlisle
@tcardizzle
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Since joining Public in early 2020 I've had a tradition of giving out insights at the end of each year regarding the trends I expect to be the strongest over the coming year. Last year I talked about how tech stocks were in for a rough year this year due to the likelihood of a strong Fed rate hiking cycle and an end to their 13+ year policy of Quantitative Easing. I settled on a few potential ways to benefit from the change in policy. These were $TMV $PFIX $SARK and the high yield dividend payer $SLVO. YTD: (As of 4:00p 12/22/22) $TMV +121.83% $PFIX +77.81% $SARK +82.36% $SLVO dividend yield (link below) 31.82% I'm not pointing this out because I want a cookie or something.. I'm pointing this out because typically the first response to any prediction is "what do you know?" Despite a significant number of comments last year strongly disagreeing with my predictions, they largely panned out. So I'm going to share my insights into the trends I think will drive the market next year, my evidence for believing this, and some symbols I think will benefit from this. This is not an instruction to go out and buy this stuff, just my thoughts to help point you towards some areas to do your own research. With that being said, I see 3 trends that I believe will drive the market next year. I'm going to dedicate a post to each of these 3 trends because I have a tendency to be detailed (long winded) and these are complex issues! So here's my breakdown of the first trend! 1) Energy The energy sector, tracked by $XLE has returned 52% this year as of writing this post. With gains that large it seems crazy to suggest that the outperformance will continue right? Well according to Factset: (link below) "At the sector level, analysts are most optimistic on the Energy (63%), Communication Services (61%), and Information Technology (61%) sectors, as these three sectors have the highest percentages of Buy ratings." But aren't analysts usually wrong? I mean on average analysts were off by 40% on their end of year S&P 500 predictions (worst performance since 2008). Yes. But again according to Factset: "The Energy sector had the highest percentage of Buy ratings at the end of last year and has also recorded the largest price increase (+52%) of all eleven sectors since the end of last year." The Energy sector also has the lowest PE (price to earnings) ratio of any of the 11 sectors, currently at an 8.6 entering December whereas the S&P 500 has an 18.4. The energy sector also has the lowest PEG, P/S, and 2nd lowest P/B ratio of any sector. How can this be if the energy sector returned 52% so far this year? According to Factset: "The Energy sector is expected to report the highest (year-over-year) earnings growth of all eleven sectors at 151.7%. Higher year-over-year oil prices are contributing to the year-over-year improvement in earnings for this sector, as the average price of oil in CY 2022 to date ($95.10) is 40% above the average price for oil in CY 2021 ($68.11)." Energy is one of 2 sectors with projected EPS growth in 2023. "At the sector level, nine sectors witnessed a decrease in their bottom-up EPS estimate for CY 2023 from September 30 to November 30, led by the Communication Services $XLC (-9.4%), Materials $XLB (-8.1%), and Consumer Discretionary $XLY (-6.8%) sectors. On the other hand, two sectors witnessed an increase in their bottom-up EPS estimate for CY 2023 during this time, led by the Energy (+4.4%) sector." Low multiples, projected earnings growth, the fact oil is ending the year at a 12 month low, and China "reopening" all provide continuing tail winds for the energy sector heading into next year. There are several paths to taking advantage of this macro trend. 1) Commodity ETFs. $BNO +29.22% YTD $USO +24.54% YTD $UNG +26.58% YTD 2) Broad Sector ETFs $PXE +49.38% YTD $PXI +39.4% YTD $OIH +57.45% YTD $XLE +52.05% YTD $PSCE +39.14% YTD 3) Leveraged ETFs *risky* $OILU +130.72% YTD $GUSH +58.45% YTD $ERX +109.75% YTD 4) Individual Stocks There's a LOT of them $EOG $NINE $VIST $HNRG $DVN $COP $FANG $HAL $OXY $SLB $PBT are just a few. Again, this isn't an exhaustive list and is meant to help point you in the direction of stocks, ETFs, and strategies to research further on your own. When looking at individual companies I suggest looking for companies that have a history of earnings beats, are increasing revenue and EPS quarter over quarter and year over year, profitable, have low debt, and are trading at ratios below their peers (PE, P/S, P/B, PEG). This is post 1 of 3 where I'm discussing the trends I think will drive the market in 2023. Please follow me here or join us on Discord to be notified of the next post! My goal is to try and help people make money in what should prove to be a difficult year for gains. If you find these posts helpful please share them! https://discord.gg/GaUxA4dvZs ////// Link to Post 2 https://public.com/p/BQSU7yCPEG9Un7BhAZw39Rxnnco5KaFn /////// Link to Post 3 https://public.com/p/FFRnfX8rUvrx3DYacTHFIT6uCwGKGupf //////// https://www.nasdaq.com/market-activity/funds-and-etfs/slvo/dividend-history ////// https://insight.factset.com/where-are-analysts-most-optimistic-on-ratings-for-sp-500-companies-heading-into-2023?_ga=2.45563308.945692779.1671745371-57495006.1666217433&_gac=1.24765768.1671745371.CjwKCAiAnZCdBhBmEiwA8nDQxS0wQclruuuN_pV4TwbEt7cKhIb5hAJkot6kRNnGxjKxcKU3BTWK8xoCgvMQAvD_BwE&_gl=1*1qb2b5z*_ga*NTc0OTUwMDYuMTY2NjIxNzQzMw..*_ga_2Q3PTT96M8*MTY3MTc0NTM3MS4xMS4wLjE2NzE3NDUzNzEuMC4wLjA. ////// https://insight.factset.com/sp-500-cy-2022-earnings-preview-ex-energy-sp-500-expected-to-report-decline-in-earnings?_ga=2.146821695.945692779.1671745371-57495006.1666217433&_gac=1.186347227.1671745371.CjwKCAiAnZCdBhBmEiwA8nDQxS0wQclruuuN_pV4TwbEt7cKhIb5hAJkot6kRNnGxjKxcKU3BTWK8xoCgvMQAvD_BwE&_gl=1*1qs24bl*_ga*NTc0OTUwMDYuMTY2NjIxNzQzMw..*_ga_2Q3PTT96M8*MTY3MTc0NTM3MS4xMS4xLjE2NzE3NDU4NzAuMC4wLjA. ////// https://insight.factset.com/larger-cuts-than-average-to-eps-estimates-for-sp-500-companies-for-q4-to-date ///// #tcardizzle
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