The next big things for investors are always around the corner. As investors say goodbye to the 2022 bear market, we look forward to what could be an excellent 2023.
Indeed, while this coming year will likely provide investors with just as many fears, bearish market sentiment is nothing new. The stock market perpetually swings between bullish and bearish sentiment. However, investors who search for the next big things will start 2023 on strong footing.
There are several thematic investment areas to consider building upon, for those in search of the rather nebulous ‘next big things.’ Positive long-term trends in innovation in the healthcare via biotechnology research will not change. Those companies on the verge of a breakthrough blockbuster drug will reward their shareholders over time. Gene therapy is another key area scientists and investors alike are focused on.
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Additionally, governments appear keen on inspiring investment in key clean energy sectors. Those that cater to these high-growth spaces could provide outsized returns.
Other sectors such as semiconductors, networking solutions, and other tech sectors are worth a look. This chart below highlights a range of stocks covering these sectors, providing exposure to companies that could be the next big things, for investors on this search.
Arista Networks | $132.42 | |
Beam Thereapeutics | $45.29 | |
Broadcom | $568.18 | |
Daqo New Energy | $46.67 | |
Intellia Therapeutics | $39.67 | |
Matson | $62.19 | |
Trane Technologies | $175.15 |
Arista Networks (ANET)
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Arista Networks (NYSE:ANET) designs multilayer network switches for the data center, cloud computing, and high-performance computing markets. In the company’s third quarter, Arista posted revenue growth of 11.9% year-over-year to $1.177 billion. Chief Financial Officer Ita Brennan said that the company’s earnings benefited from the operational leverage of the company’s business model.
In 2023, Arista is expected to achieve 25% growth. That’s impressive, considering the company is coming off of growth of around 40% this year. The company anticipates its customers will moderate cloud spending. Thanks to a recovery in its supply chain, Arista will extend its lead time for new products. Thus, customers will have more time to plan their purchases throughout the year, something that is viewed negatively right now but could provide more revenue stability in the future.
In the company’s enterprise segment, Arista is winning more business beyond its data center business. For example, customers need management tools in the WiFi market. They are buying Arista’s visibility and security solutions.
Stock markets anticipate an economic slowdown from here. However, Arista is one company I think can buck the trend. Investors should expect strong business momentum and expanding profit margins in 2023.
Beam Therapeutics (BEAM)
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Beam Therapeutics (NASDAQ:BEAM) is a biotechnology company. It has two major products in clinical development.
The company delayed its decision to file for an investigational new drug application for BEAM-102 in November. This is a base gene editing program that Beam designed to treat Sickle cell disease (“SCD”). The therapy edited a point mutation in the hemoglobin of affected patients.
Instead,Beam wants to optimize its Makassar approach. As a result, investors will have to wait for the results of its Wave 2 and Wave 3 trials.
On Dec. 2, Beam Therapeutics said that the U.S. Food and Drug Administration lifted a clinical hold for the IND application for BEAM-201. This lets the company develop its treatment for relapsed/refractory T-cell acute lymphoblastic leukemia (T-ALL)/T-cell lymphoblastic lymphoma (T-LL).
Beam’s cell therapy technology involves cell engineering through multiplex base editing technology. As a result, investors should expect the company to deliver positive updates for BEAM-201 with its upcoming trials set for 2023.
Broadcom (AVGO)
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Broadcom (NASDAQ:AVGO) is a global supplier of semiconductors and other infrastructure hardware and software products. The company posted strong results in the fourth quarter. It also raised its dividend by 12% to $4.60 a share.
Chief Executive Officer Hock Tan said that enterprise customers are spending on hyperscale solutions. In North America, Europe, and parts of Asia, customers are deploying broadband. As a result of what could be a multi-year spending spree, Broadcom is expected to continue to deliver strong results through 2023.
In the months ahead, shareholders may expect Broadcom’s largest enterprise customers will sustain their information technology spending. Although this trend is not certain, markets appear confident in the company’s prospects. AVGO stock bottomed at around $420 in Oct. 2022. It closed at around $545 on Dec. 9.
Broadcom has a backlog worth $31 billion for semiconductor products. Accordingly, for those bullish on the company’s model and its growth trajectory, it’s worth considering the likelihood this backlog increases over time. In 2023, I expect strong sales of MegaRAID products and other next-generation products, driving valuation growth.
Daqo New Energy (DQ)
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Daqo New Energy (NYSE:DQ) manufactures high-purity polysilicon for photovoltaic product manufacturers. In other words, this is a company that’s a major supplier of solar panes. With demand for solar panels likely to increase in 2023, I think Daqo’s long-term prospects remain strong.
For the current quarter, CFO Ming Yang remains bullish on this trend, noting that Daqo sold out of itskey products for November. Investors may infer that polysilicon pricing may not drop as much as is expected. In addition, the company’s supply remains constrained, due to supply chain bottlenecks across the value chain.
That said, Daqo is a company with a competitive advantage relative to its peers. New entrants simply do not have enough experience in the highly-complex world of polysilicon production. Thus, as supply remains limited in the market, improved pricing dynamics should drive Daqo’s profits higher next year.
To meet strong demand, Daqo started construction on a plant in Mongolia in March 2022. This increases the company’s capacity and its revenue potential. Once construction is completed on this facility, I expect to see increased supply drive a surge in profitability in 2023 and beyond.
Intellia Therapeutics (NTLA)
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Intellia Therapeutics (NASDAQ:NTLA) is a clinical-stage biotechnology company, employing CRISPR-based (genetic) technologies.
On Nov. 30, NTLA stock dropped after the company announced a 6.55 million share price offering at $45.80. This offering is expected to raise around $300 million, but also leads to dilution for existing share holders. Now, such a stock sale is typical for a biotech firm in its clinical stage of product development. That said, it’s the capital expenditure requirements of such companies, as well as their potential dilutive downside, that has some concerned.
Of course, that’s something investors need to consider. It’s what’s been driving underperformance of late. But those thinking longer-term will note that Intellia is a company with $840 million of cash on its balance sheet (before the stock offering). Thus, this is a company that’s clearly bolstering its balance sheet ahead of what could be a difficult time to obtain financing. I view this as a positive.
Additionally, the company has plansto advance its clinical trial programs in 2023. Studies in the ex vivo space will require key, strategic collaborations across the industry. Accordingly, Intellia has turned to AvenCell and Kyverna in key partnerships of late.
Matson (MATX)
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Matson (NYSE:MATX) is a shipping and navigation services company. In the company’s third quarter, Matson posted GAAP earnings per share of $6.89 on revenue of $1.11 billion. Additionally, the shipping company bought back around 1.1 million shares in the quarter.
Matson is adjusting to falling market demand by reducing its capacity. Other carriers are doing the same. This should improve air freight and conventional ocean shipping rates for clients (a good thing for the broader sector).
That said, less volume means less profitability for shippers in this space. Additionally, various retail customers have seen inventory replenishments decrease as weaker product demand proliferates. These are headwinds investors need to consider in the near-term.
That said, the company is well-positioned for the Spring quarter moving forward. Despite having lower volumes of shipments on the horizon, the company is expected to provide consistent earnings strength as its capacity is adjusted accordingly.
Finally, investors should consider thatMatson has a joint venture with SSA Terminals. This gives the company plenty of influence on marine terminals on the West Coast. Thus, the company may charge a premium in those markets, providing another profitability lever the company can use to benefit shareholders.
Trane Technologies (TT)
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Rounding out this list of next big things for investors to buy heading into 2023 is perhaps a less-exciting company than many on this list.Trane Technologies (NYSE:TT) manufactures heating, ventilation, and air conditioning and refrigeration systems. In the latest quarter, the company posted revenue growth of 17.5% year-over-year to $4.37 billion.
Notably, these strong results were driven by a surge in bookings for the company of 4% year-over-year to $4.49 billion.
Thus, this is a company with approximately one year of revenue that’s been pre-booked. With this significant order backlog, the company has visibility for its revenue growth on the horizon. For this year, the company predicts revenue growth will come in around 12%. For next year, many investors believe such a growth rate may be sustained.
Despite inflation and other factors hitting the company’s potential demand on the horizon, it’s clear Trane’s products are a hit among its core base. The company alsoenjoys a strong interest in the electronics, high-tech industrial, battery plants, and electric vehicle plants segments.
Trane has a backlog of $6.4 billion, providing plenty of revenue visibility for 2023. Despite cost inflation remaining a concern, Trane is managing its costs well. Thus, I expect margins to remain strong, and potentially expand once commodity prices decline next year.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.
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