Investors are more than happy to close the book on 2022, the first time in four years the S&P 500 closed with a loss and the worst performance in over a decade. Only the financial markets' collapse in 2008 produced a worse return for the index.
But there is reason to be hopeful about the coming year because the S&P 500 has only rarely ever produced two consecutive years of losses. The bursting of the dot-com bubble in 2000 actually led to three straight years of negative returns (helping to usher in the start of the so-called "lost decade").
But you have to go all the way back to the 1970s to find the next time the broad market index was down for two years running.
Image source: Getty Images.
That's no guarantee this year won't be a bummer again, but the odds are in favor of stocks bouncing back in 2023, and after 14 consecutive months of decline, growth stocks might just find themselves in the driver's seat once more.
Analysts and economists are still wary of the situation since the probability of a recession seems high. Interest rates are rising, the housing market is starting to crumble, and household debt is soaring as 40-year-high inflation rates slam consumers. Yet if you have $10,000 to invest, the following pair of stocks is just where you would want to put $10,000 right now and keep it there for years to come.
1. Texas Instruments
Chipmaker Texas Instruments (TXN 5.64%) isn't seen as a sexy growth stock in the way industry peers Nvidia or Broadcom might be, and that's both a mistake and an opportunity.
Texas Instruments' chips aren't flashy graphics processors or high-end central processing units. Instead, they are the analog and embedded chips that are the industry's nose-to-the-grindstone type found in the automotive, communications, consumer electronics, and industrial markets. And its stock has performed in workmanlike fashion as well.
Over the past decade, Texas Instruments shares have generated a total return of 393% compared to a 156% return by the S&P 500. And though its stock is down 13% over the past year, it's still performing better than the index.
A good part of the reason for the semiconductor stock's strength is its free cash flow -- some $6.82 per share in 2021 -- which is growing at a 12% compound annual rate since 2004.
Couple that with a generous dividend policy, which has seen the payout increase at a compound annual rate of 25% over that same time frame, and investors have been well rewarded for their faith in its business. Texas Instruments has raised its dividend for 19 consecutive years, making the chipmaker a stock well worth buying into 2023 and then holding for decades to come.
Image source: Lowe's.
2. Lowe's
Do-it-yourself hardware retailer Lowe's (LOW -1.40%) is another stealth growth stock that is worth having in your portfolio. Like Texas Instruments, the big-box store has a long record of outperformance that over time has richly rewarded patient investors.
While I would hesitate to call any business recession-proof, Lowe's is certainly resistant to the whims of a changing economy. In boom times, the new-home market provides a lift, while in tough times, consumers turn to maintaining their existing homes.
Lowe's also tends to cater more to homeowners than rival Home Depot, where contractors represent 45% of total sales versus just 25% for Lowe's. So should the housing market get uglier, it won't affect Big Blue as badly since home decor is its largest segment, with almost $8.2 billion in sales in the third quarter.
Also like the chipmaker, Lowe's makes it a corporate policy to share its success with investors. Its long-term target for return on invested capital (ROIC) is 32%, but it expects to end 2022 at 37%, and it forecasts that between 2025 and 2027, ROIC will grow to 45%.
It also has a better than 50-year history of raising its dividend, making it a Dividend King, and keeps its payout ratio -- the share of its profits it pays out as dividends -- at 35%, ensuring its safety and potential for growth.
Lowe's total return over the past 10 years has more than doubled that of the S&P 500, and it has a solid future. That makes it a great company to park 10 large for the long haul.
