Could 2023 be a great year for stock market investment?

So far, some shares are showing strong gains this year. Christopher Ruane explains why he is ignoring the big picture and hunting individual bargains.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

White note with '2023' written on, pinned to a yellow background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

So far, so good! Looking at the performance of my investment portfolio since this year began last month, I see some pleasing results. Since the start of January, the FTSE 100 is up 5% — and has hit a new all-time high along the way. The NASDAQ index in the US is 14% higher than it was at the start of the year.

As a long-term investor, though, my focus is not on just a few weeks. Instead, I am trying to build wealth through stock market investment over the course of years. While the FTSE 100 is 5% higher than a year ago, the NASDAQ is 14% lower.

With a strong start to the year so far, could 2023 turn out to be a rewarding year for me to invest?

Should you invest £1,000 in easyJet right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if easyJet made the list?

See the 6 stocks

Focus on quality

I think it could.

But that is not because I have some premonition about where the overall stock market will go. Nobody knows for sure what level the FTSE 100 will be at next week, never mind the end of December.

But what I do know is that right now, I can buy some great companies at what I see as attractive prices.

Take JD Sports as an example. The company is on a tear and expects to earn a headline profit before tax and exceptional items of just over £1bn in its current financial year. Yet it has a market capitalisation of £9bn. That price-to-earnings (P/E) ratio looks attractive to me.

I plan to keep my JD Sports shares as I continue to see them as undervalued relative to their long-term prospects. This month the firm announced ambitious growth plans, including opening hundreds of new shops each year.

Hunting for bargains

But JD Sports is not the only share I think could offer me great value right now.

Fellow FTSE 100 member DCC has raised its dividend annually for almost three decades. After a share price fall, it trades on a P/E ratio of around 13.

Created with Highcharts 11.4.3Dcc Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

But I see strong growth opportunities for the conglomerate, which last week announced that its latest quarter saw higher profit than the same three months last year. I think DCC looks cheap and have recently added the shares to my portfolio.

Long-term investment strategy

All firms face risks. JD Sports could see sales fall due to tighter consumer budgets, for example, while weak performance in DCC’s healthcare business might be a drag on profits.

But if I can identify a group of shares I think each offer great value given their business prospects, I could reduce my downside risk through diversification. Meanwhile, I would hopefully have upside investment potential over the long term if the businesses turn out to be as good as I think they are.

Right now I can see quite a few shares that fit that description. Some, like DCC, I have already added to my portfolio. Others I am still researching or eyeing for when I have spare funds to invest. Whatever happens to the stock market overall in 2023, I am hoping it could turn out to be a great year for me to invest.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has positions in Dcc Plc and JD Sports Fashion. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »

Investing Articles

Are Trump’s tariffs a once-in-a-lifetime chance for ISA investors to get rich?

The £20,000 Stocks and Shares ISA limit will reset on 6 April. Smart investors could use current market volatility to…

Read more »

Investing Articles

Here are the latest Persimmon share price and dividend forecasts

Our writer looks at the latest forecasts for the Persimmon share price and considers what level of dividend the stock…

Read more »

British Pennies on a Pound Note
Investing Articles

Up 900%, could penny share Kodal Minerals have further to run?

Over five years, this penny share has increased in value by a factor of 10. Could the latest news persuade…

Read more »

Investing Articles

3 world-class stocks to consider buying, while they’re ‘on sale’

Looking for stocks to buy? These three all have attractive long-term prospects and are currently trading 20% or more below…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Could BP’s share price rebound over the next 12 months? These analysts think the answer is ‘yes’!

BPs share price has plummeted over the last year. But City brokers think things are about to turn around, as…

Read more »

Investing Articles

Is this an unmissable opportunity to buy Nvidia stock?

Nvidia stock is down 33% from its peak, driven by tariffs and geopolitical pressures. Despite this, some investors may spy…

Read more »