When I look for stocks to buy, I try to follow Warren Buffett’s advice. This means looking for shares in quality businesses trading at decent prices and being “greedy when others are fearful“.
This gives me the best chance of getting a decent return on my investments. And thinking about what the stock market is likely to do gives me an idea of what sort of companies to look at.
The stock market in 2023
Rising interest rates in 2022 mean that I’m expecting a recession in 2023. If that happens, I think shares in businesses that make everyday products will do well.
That means I’m looking to stay away from defensive stocks. I expect these to perform relatively well, so I think they’re unlikely to trade at attractive prices.
Instead, I’m looking for stocks that are likely to face headwinds from a difficult macroeconomic environment. These are typically tech companies, industrials, and financials stocks.
Berkshire Hathaway
Top of my list is Warren Buffett-led Berkshire Hathaway. The holding company is a cross between a financials stock and an industrials business.
The majority of Berkshire’s income comes from its insurance, railroad, utilities, and manufacturing subsidiaries. As a result, I expect its share price to come under pressure in 2023 as its major operations face a tougher macroeconomic environment.
Berkshire also has a diverse stock portfolio among its assets, though, with significant investments in Bank of America, Coca-Cola, and Chevron, among others. This, plus the company’s strong balance sheet means that I’ll be looking to buy the stock any time the share price falters.
Experian
Second on my list is Experian. The credit bureau is a FTSE 100 financial that I think has a better outlook than its share price currently implies.
An economic contraction is likely to cause headwinds for the company as the housing market slows down. But it has a strong competitive position that I think will remain intact.
I’m therefore on the lookout for buying opportunities when it comes to Experian in 2023. I own some shares already and I’m hoping to be able to add to my investment at a good price.
Apple
I’m constantly impressed by Apple’s ability to generate cash. The company’s app store is my idea of an ideal business – one that just brings in cash without having to spend much in order to grow.
Apple shares are down 18% over the last 12 months. But I think that the share price has further to fall.
I’d be happy buying this stock under $150 per share. The current price is $145 and I think the stock market might well give me even better opportunities in 2023.
Halma and Diploma
Lastly, I’m looking at two UK stocks in the industrials sector. Halma and Diploma are both conglomerates that are made up of a number of smaller businesses.
Halma focuses on industrial safety, environmental monitoring, and healthcare. Diploma acts as a distributor for industrial components and divides its operations into controls, seals, and life sciences.
I think that these are two of the strongest businesses in the UK. But I think that both share prices might fall in 2023.
That’s fine by me, though. The chance to buy shares in high-quality companies at lower prices is just what I’m looking for in 2023.
