Last year served as an unpleasant, yet important, reminder that the stock market doesn't move up in a straight line -- even if 2021 made everyone believe it did. When the closing bell tolled, the benchmark S&P 500 ended down by 19%, with the iconic Dow Jones Industrial Average and tech-heavy Nasdaq Composite also entering bear market territory during the course of the year.
Thankfully, a new year brings new opportunities for investors. Despite historically high inflation and growing economic uncertainty, the following 10 top stocks have the tools and intangibles necessary to make you richer in 2023.
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1. Mastercard
The first top-notch stock that can help you build wealth in the new year is payment processor Mastercard (MA -1.19%). Even though financial stocks are cyclical, and therefore prone to weakness when economic downturns arise, Mastercard has clear-cut competitive advantages that should shield it from much of this potential weakness in 2023.
To begin with, Mastercard's management team has kept the company focused on payment processing while avoiding the lending arena. When the U.S. and global economy weaken, it's not uncommon for delinquencies and loan losses to rise. Since Mastercard doesn't lend, it's not required to set aside capital to cover loan losses. This small but important detail helps explain why its profit margin is consistently above 40%.
Furthermore, Mastercard should continue to benefit from historically high inflation. With the U.S. personal saving rate plunging, more consumers and businesses than ever are turning to credit cards to fund their purchases. Mastercard is No. 2 in the U.S. in credit card network purchase volume and has plenty of runway to organically expand into underbanked emerging markets over the coming years.
2. NextEra Energy
A second top stock that can make you richer in 2023 is the largest publicly traded electric utility by market cap in the U.S., NextEra Energy (NEE 0.34%). Despite a modest down year in 2022, NextEra has delivered a positive total return, including dividends paid, to its shareholders in 19 of the past 21 years.
Buying into profitable, time-tested, dividend-paying companies that provide basic necessity goods and services is often a smart strategy during a bear market. Since electricity consumption habits don't change much from one year to the next, a company like NextEra can accurately forecast its operating cash flow in advance. This lets the company outlay capital for new projects, acquisitions, and its distribution, without having to worry about adversely impacting profits.
The other key to NextEra Energy's outperformance is its willingness to invest big in renewable energy. No electric utility is generating more capacity from wind or solar power. These investments have lowered the company's electricity generation costs and lifted its adjusted earnings growth to an annualized average of 8.4% since 2006.
3. Vertex Pharmaceuticals
Biotech stock Vertex Pharmaceuticals (VRTX 0.10%) is another top stock that can make you richer in the new year. Since we can't control when we get sick or what ailment(s) we develop, there's always going to be demand for prescription drugs, medical devices, and healthcare services, no matter how the economy or stock market perform.
What makes Vertex so special is its dominance in helping patients with cystic fibrosis (CF), a genetic disease characterized by thick mucus production that can obstruct the lungs and pancreas. Vertex has developed four generations of CF therapies designed to improve lung function and is currently working on a fifth. Combination CF therapy Trikafta is pacing over $8 billion in annual run-rate sales.
The company's product pipeline beyond CF is also promising. It's working with CRISPR Therapeutics to use gene editing as a way to treat sickle cell disease and transfusion-dependent beta thalassemia, and it has novel treatments in its pipeline to treat pain, type 1 diabetes, and APOL1-mediated kidney disease. Positive data readouts in 2023 can send Vertex even higher.
4. Markel
The fourth top stock capable of growing your wealth in 2023 is specialty insurance company Markel (MKL 0.53%). Though Hurricane Ian put the hurt on the insurance industry last year, Markel brings its own advantages to the table.
From a macro perspective, insurers and reinsurers have exceptional pricing power. Whether a catastrophe necessitates higher premiums or an insurer is prepping ahead of the next inevitable event, insurers have no trouble increasing premiums on their customers. It's what tends to lift profits over time.
To add to this point, the Fed's hawkish monetary policy is a positive for Markel and its peers. Collected but unused premium (known as "float") is typically invested by insurance companies in U.S. Treasury bonds. As the Fed has lifted rates, the yield Markel is netting from its float has jumped considerably.
Lastly, Markel has nearly $7 billion invested in equities. The company's diverse investment portfolio has historically helped it take advantage of long-term growth in the U.S. and global economy.
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5. Fiverr International
A lesser-known top stock that can make you richer in 2023 is small-cap online-services marketplace Fiverr International (FVRR -1.44%). Fiverr offers two key differences from other freelancer marketplaces that makes it a screaming buy.
First, Fiverr's platform provides better price transparency for buyers. While most online marketplaces present freelancer jobs on an hourly basis, Fiverr freelancers present tasks at an all-inclusive price. This price transparency is likely a key reason that both spend per buyer and the aggregate number of buyers on Fiverr's platform climbed throughout 2022.
Arguably the top reason Fiverr stock can advance in 2023 is its take-rate -- i.e., the percentage of each deal negotiated on its marketplace that it gets to keep. During the September-ended quarter, the company's take-rate hit 30% on the nose. Its take-rate has consistently expanded, which should yield juicier operating margins in the quarters to come.
6. AT&T
Telecom stock AT&T (T 1.30%) is a sixth top-tier company that can make you richer this year. Since having access to wireless services and a smartphone have effectively evolved into necessities over time, near-term economic weakness isn't a concern for one of the nation's largest wireless service providers.
AT&T's core catalyst remains the rollout of 5G. Although upgrading its wireless infrastructure to support faster download speeds isn't cheap and won't happen overnight, it's created an ideal scenario that'll see consumers and businesses upgrade their wireless devices and consume more data. Not surprisingly, AT&T recognized its fastest wireless services revenue growth in more than a decade during the third quarter.
AT&T's balance sheet has also improved from the prior-year period. The spinoff of Time Warner in April, and its subsequent merger with Discovery to create Warner Bros. Discovery, led to the assumption of certain debt lots by the new company, as well as cash payments to AT&T.
With a more flexible balance sheet, AT&T's 6% yield looks especially sound.
7. AGNC Investment
Despite being disliked by Wall Street, mortgage real estate investment trust (REIT) AGNC Investment (AGNC 0.22%) is well positioned to make its shareholders richer in 2023. AGNC is one of Wall Street's highest-yielding stocks (13.7% yield) and has maintained a double-digit yield in 13 of the past 14 years.
Last year, rapidly rising interest rates made short-term borrowing costlier for AGNC. Additionally, the inversion of the interest rate yield curve hurt the company's net interest margin and book value.
But things could change in 2023 as the pace of interest rate hikes slows. A reversal of the yield-curve inversion can quickly right the ship for AGNC.
What's more, all but $1.7 billion of AGNC Investment's $61.5 billion investment portfolio was tied up in agency assets at the end of September. An agency security is backed by the federal government in the event of default. This added protection on AGNC's portfolio allows it to prudently use leverage to magnify its profits and sustain its inflation-crushing distribution.
8. UnitedHealth Group
The eighth top stock that can make you richer in 2023 is health insurance and healthcare services juggernaut UnitedHealth Group (UNH 2.96%). Like NextEra, UnitedHealth Group has produced only two negative total returns for its shareholders over the past 21 years.
As mentioned earlier, insurance companies almost always possess excellent premium pricing power. While the Affordable Care Act did place some level of constraint on health insurers, UnitedHealth hasn't had any trouble passing along higher premiums to its individual and corporate members.
The far bigger opportunity for UnitedHealth Group has been its healthcare services subsidiary Optum. This diverse segment, which provides everything from healthcare software to prescription filling services, has consistently grown at a faster pace than traditional health insurance and offers better operating margins. If a recession were to occur this year, many of UnitedHealth Group's operating segments would be insulated.
9. Enterprise Products Partners
While it's no guarantee energy stocks deliver an encore performance this year, oil and gas stock Enterprise Products Partners (EPD 0.18%) certainly has the ability to make its shareholders richer. Enterprise is doling out a 7.9% yield and has increased its base annual distribution in each of the past 24 years.
Whereas drilling and exploration stocks can be whipsawed by crude oil and natural gas spot price volatility, Enterprise Products Partners avoids most of this instability. That's because it's a midstream energy company responsible for transporting, storing, and processing crude oil, natural gas, natural gas liquids, and refined products. Because it signs long-term, fixed-fee contracts that remove inflation from the equation, Enterprise can accurately forecast its operating cash flow year in and year out.
A globally broken energy supply chain should also help Enterprise Products Partners. Russia's invasion of Ukraine, coupled with reduced capital investment during the pandemic by major energy companies, will make it incredibly difficult to quickly increase the global supply of oil and natural gas. If the price of these commodities remains elevated, Enterprise shouldn't have any trouble landing new long-term contracts in 2023.
10. Berkshire Hathaway
Last, but not least, Warren Buffett's Berkshire Hathaway (BRK.A 0.64%) (BRK.B 0.54%) is a top stock that can make you richer in 2023. Buffett's company outperformed the S&P 500 by 23 percentage points last year.
While there is a long list of reasons for Warren Buffett's success as CEO of Berkshire Hathaway, a lot of it can be explained by a clear-cut focus on cyclical stocks and dividend-paying companies. Buffett understands that recessions are an inevitable part of the economic cycle, and trying to time these events isn't possible. Instead, he's packed Berkshire Hathaway's investment portfolio with companies that'll thrive during long-winded periods of economic expansion.
The other key attribute is dividend income. Berkshire Hathaway is on track to collect more than $6 billion in payouts this year -- most of which will come from just a few holdings. Dividend stocks are typically profitable and have demonstrated an ability to handily outperform stocks that don't offer a dividend over long periods. Using time as an ally has long been one of Buffett's not-so-subtle secrets to success.
