Sometimes things just don't go as planned, and 2022 is the perfect example. Following one of the least volatile years in recent memory, all three major U.S. stock indexes have plunged in excess of 20% from their highs to enter a bear market.
The thing about bear markets is that, while they can be scary in the short term, they're historically the perfect time to put your money to work. With the exception of the current downturn, every single double-digit-percentage decline in the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite has eventually been erased by a bull market. This'll undoubtedly prove true of the 2022 bear market in due time.
Image source: Getty Images.
More importantly, you don't need a lot of starting capital to begin building wealth on Wall Street. Given that most online brokerages have done away with commission fees and minimum deposit requirements, any amount of money -- even $100 -- can be the right amount to put to work in the new year.
If you have $100 ready to invest, that won't be needed to cover bills or emergencies, here are four of the best stocks you can buy in 2023.
Alphabet
Without a doubt, one of the best stocks to buy with $100 in 2023 is Alphabet (GOOGL +2.12%)(GOOG +2.20%), the parent company of internet search engine Google, streaming platform YouTube, and autonomous vehicle company Waymo.
Through last weekend, shares of Alphabet were down 36% year to date. This decline reflects the growing likelihood that the U.S. will enter a recession at some point next year. Alphabet generates most of its revenue from advertising, and ad spend tends to be one of the first areas to be hit when U.S. economic growth falters. While this is a tangible concern over the next couple of quarters, it has no bearing on Alphabet's long-term growth trajectory.
Internet search engine Google will continue to serve as Alphabet's cash cow. Based on data from GlobalStats, Google has accounted for between 91% and 93% of worldwide search share for 36 consecutive months (and counting). With a practical monopoly on internet search, it should come as no surprise that the company can command superior ad-pricing power during periods of economic expansion.
Beyond this foundational operating segment are Alphabet's fast-growing ancillary operations. This includes YouTube, the second most-visited social site on the planet; Waymo, which is expected to control 60% of the U.S. driverless market by 2030 per UBS; and Google Cloud. The latter is particularly intriguing, with Google Cloud increasing its share of global cloud spend to 9% in the third quarter. With cloud margins handily outpacing advertising margins, Google Cloud has a case to become Alphabet's leading cash-flow driver within five years.
NYSE: NEE
Key Data Points
NextEra Energy
A second no-brainer buy with $100 for 2023 is the nation's largest electric utility stock by market cap, NextEra Energy (NEE 0.66%).
One of the more interesting facts about NextEra Energy is that it has a nearly perfect track record for its shareholders over the past two decades. Inclusive of dividends paid, NextEra has generated a positive total return for its shareholders in 19 of the past 20 years. It's possible 2022 could be the second time in 21 years its shareholders end with a loss, but that's all the more reason to buy in at a discount.
What really separates NextEra from other electric utilities is its renewable energy portfolio. There isn't a utility stock generating more capacity from solar or wind power. Although investing in solar and wind projects can be pricey, the company was able to use more than a decade of historically low interest rates to its advantage to grow its green-energy capacity. Thanks to significantly lower electricity generation costs, NextEra's compound annual adjusted earnings growth rate is 8.4% since 2006. Comparatively, most utility stocks average low-single-digit earnings growth.
Another reason NextEra Energy makes for a smart investment in 2023 is because of the defensive nature of utility stocks. No matter how poorly the stock market or U.S. economy perform, homeowners and renters don't change their electricity consumption habits much from one year to the next. When coupled with the company's regulated utility operations (i.e., those not powered by renewable energy sources), you're talking about highly predictable and transparent operating cash flow -- and Wall Street loves predictability.
Image source: Getty Images.
Cresco Labs
A third company that makes for one of the best buys in 2023 with $100 is marijuana stock Cresco Labs (CRLBF +24.21%).
Like most U.S. pot stocks, Cresco has been a buzzkill for its investors since February 2021. The expectation had been that a Democrat-led Congress and President Joe Biden in the Oval Office would lead to cannabis reform. That simply hasn't been the case, and skeptics have punished the industry for Capitol Hill's lack of progress.
On the other hand, three-quarters of all U.S. states have given the green light to cannabis in some capacity, which is all a company like Cresco Labs needs to succeed.
One of the biggest catalysts for Cresco in the new year is its still-pending acquisition of multi-state operator (MSO) Columbia Care. Despite having to sell off a dozen combined dispensaries and cultivation assets to satisfy regulators, the duo will operate over 120 dispensaries in 18 states when the deal finally closes. This gives Cresco Labs even more opportunity to grow its brands and increase awareness in public view.
But what really separates Cresco Labs from other MSOs is its wholesale operations. Wall Street typically shuns wholesale cannabis because the margins associated with selling marijuana products at the retail level are notably higher. The key is that Cresco Labs holds a highly lucrative cannabis distribution license in California. This allows the company to place its proprietary pot products into more than 575 dispensaries throughout the Golden State and use volume to its advantage. California does, after all, lead the country in annual cannabis sales.
NYSE: DIS
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Walt Disney
The fourth and final best stock to buy with $100 in 2023 is entertainment and media giant Walt Disney (DIS +0.41%).
Whereas media companies were hurt across the board by the pandemic, two of Disney's core revenue sources were crushed. Theme park attendance fell off a cliff, while film revenue sank with the closure of most movie theaters. The silver lining for Walt Disney is that it's in the process of moving past these headwinds. For investors, that's the ideal time to pounce.
The operating segment commanding the most attention at the moment is streaming services. Disney+ was launched in November 2019, yet has managed to sign up more than 164 million subscribers in that relatively short amount of time. Including Walt Disney's other owned streaming assets, ESPN+ and Hulu, it has more aggregate direct-to-consumer subs than Netflix. Though streaming is a money-loser for Disney at the moment, the company is targeting profitability for the segment by 2024.
Something else to note about Walt Disney is that its content, characters, and nostalgia are irreplaceable. Disney is one of the few companies that's demonstrated the ability to engage and connect with multiple generations of consumers. This is important, because it allows the company to handily outpace the prevailing inflation rate and boost its organic growth rate via price hikes -- especially at its theme parks.
If you're looking for one more good reason to buy, let it be that Bob Iger is back in the CEO chair. Iger has been an acquisitive mastermind for Disney, overseeing the purchase of Pixar, Marvel Entertainment, and Lucasfilm. Expect Iger's return to reignite growth at Walt Disney following a couple of very difficult years.
