As investors look to start the new year off strong and try to recover from stocks’ brutal 2022, RBC Capital Markets has refreshed its list of top picks. For 2023, RBC is expecting a “flattish or low single digit 12-month return in the S & P 500” and “choppy conditions over the next few quarters, between deeply bearish sentiment (a contrarian/bullish signal) and ongoing concerns about the outlook for the economy, the Fed, geopolitics, and earnings,” the firm said in a note Tuesday. In that note, RBC shared its quarterly refresh of its top 30 “high-conviction, long-term ideas,” which includes global names with an outperform rating by RBC analysts. Recovery in individual portfolios may be slow-moving, but RBC’s top picks have a track record of beating the global market. It outperformed the MSCI World Index in 2022, delivering a -12.3% return, compared with the benchmark’s -18.4%. Since its inception at the end of 2019 the firm’s Top 30 have generated a 23.2% return, compared with the benchmark’s return of 15.6%. With that, it’s also increasing its weightings in technology, consumer discretionary and communications services, and decreasing its exposure to energy, industrials and utilities. Here are 10 of its top ideas: Meta Platforms and Diamondback Energy are among the newcomers to the list. It pointed to Meta’s improving ad targeting and measurement, which it said could help drive share gains this year. It also highlighted “abating engagement share loss” to TikTok potentially driving a narrative shift that could lead to multiple expansion. The analysts swapped Diamondback for ConocoPhillips , saying the energy company has one of the highest cash margins among its peers. Diamondback also has made bolt-on acquisitions that could help free cash flow and returns, and the stock has the highest dividend yield, 9.1%, on the list. European luxury stock Ferrari is the only automaker to make the cut. RBC is optimistic about its new vehicle launches, the growth of the ultra-high net worth demographic and Ferrari’s electrification strategy in Europe. The firm’s price target on Ferrari implies about 32% upside. Cybersecurity stock Palo Alto Networks has the highest potential return of the group, with a price target of $233. That’s about 68% from where the stock closed on Tuesday. That reflects RBC analysts’ “confidence in the momentum of next-gen billings and durability of network security,” the note said. Another cybersecurity stock, CrowdStrike , could also deliver a hefty return, according to RBC. The firm has a $165 price target on the stock, nearly 60% greater than Tuesday’s closing price. CrowdStrike’s “land-and-expand model” should benefit from software-as-a-service delivery and its ability “to rapidly add more modules with no extra configuration or consulting needed.” AIG , Mastercard , PG & E , Restaurant Brands International and Veeva Systems are also among RBC’s top picks.
