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?
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.
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.
