Best Investment Idea(s) for 2023

[Viking]

So what are board members best investment ideas to make $ in 2023? So what can a board member buy on Tuesday and expect to earn a reasonable return in 2023 (which i define as +10%)? It can be a specific stock. Or a sector. Please include a couple of bullet points as to why you like the idea.

 

To get things started my highest conviction ideas today are:

1.) Fairfax. Stock was up 20% in 2022; value of business increased much more over the year. So the stock, closing at US$594, is cheaper today than it was Dec 31, 2021 when it closed at US$492. I think Fairfax will earn US$100 in 2023 (and this is my conservative estimate). Misunderstood stocks trading at a normalized PE of 6 times earnings are a layup. Fairfax is the gift that keeps on giving.

2.) oil. Not as cheap as it was Dec 31, 2021. But still cheap. Especially if the world does not go into a big recession in 2023 (and I don't think it will). Growing demand + constrained supply = higher prices for any commodity. Throw in terrible government policy, the religion of ESG, war in Ukraine, China emerging from covid, US ending SPR releases... 

- what stocks to own? I tend to stick to large cap Canadian players: CNQ, CVE and SU. My largest holding today is SU. They have had some issues and the stock looks cheaper today than CNQ and CVE. Lots of good options in oil in both Canada and the US.

- for me oil is a trade. Buy low and sell high. Rinse and repeat. This strategy worked great in 2022.

3.) US big tech looks cheap (GOOG, AMZN, META). Down 50% from highs is good enough for me. I have a 1/2 position in each today. I hope they keep selling off… so i can continue buy and get to a full position. 
- i have also started to add smaller positions in PYPL, QCOM, CIBR. Nvidea is on my watch list (i might just buy SOXX).

4.) US financials look cheap. If they go much lower from here on recession fears I will likely get aggressive. Small holding today…

 

There is lots of other stuff that is cheap. Definitely a stock pickers market. 

Edited January 1, 2023 by Viking

[no_free_lunch]

I like Logistec LGT-B.TO (Canadian port operator / oligopoly), onex.to (Private Equity), elf.to (insurance), and AVB (apartment REIT).  I don't have a top pick per se but I have positions in all of those and they all have their merits at current prices.  Logistec in particular is just crushing it right now and will likely be ignored but is due a significant re-rate.  I view it as a long term hold that should out perform the market and yet has lower beta to it.

Edited January 1, 2023 by no_free_lunch

[StevieV]

I like Fairfax's outperformance to continue for a bit.

 

I like JOE longer term, but I'm not sure it will be a great '23 calendar year performer.  (Of course, I'm not sure about any particular stock being a great calendar year performer).

 

I like Canadian E&P OBE as a bigger upside performer.  If oil prices cooperate, they should hit their long-term debt target sometime in '23.  Highly levered to the price of oil and WCS differentials and so highly dependent on pricing.  I think at current WTI ($80), they have significant upside from today's price.

 

I still like APO, but if I had to pick an alt today, I think I'd go with KKR.  I expect both to do well over the medium/longer term, but I'm not sure about '23.  KKR in particular I expect to bounce fast if the market rallies, but I have no idea when that will be.

[Gregmal]

Wouldn’t really call it a best idea but would imagine both VRE and INDT come off the board. 
 

Otherwise IDK TSLQ?

[RedLion]

6 hours ago, StevieV said:

I like Fairfax's outperformance to continue for a bit.

 

I like JOE longer term, but I'm not sure it will be a great '23 calendar year performer.  (Of course, I'm not sure about any particular stock being a great calendar year performer).

 

I like Canadian E&P OBE as a bigger upside performer.  If oil prices cooperate, they should hit their long-term debt target sometime in '23.  Highly levered to the price of oil and WCS differentials and so highly dependent on pricing.  I think at current WTI ($80), they have significant upside from today's price.

 

I still like APO, but if I had to pick an alt today, I think I'd go with KKR.  I expect both to do well over the medium/longer term, but I'm not sure about '23.  KKR in particular I expect to bounce fast if the market rallies, but I have no idea when that will be.

+1 on KKR. Not sure if it’s going to be this year or next year, but I feel like one of them is going to be a monster for KKR and you make money buying here for the medium to long term. The valuation is very low, and while the business is very PE heavy they are quickly building their infrastructure, credit, and insurance business. They have a big Asia franchise which I think is a bit competitive advantage and they have a big growth runway on Asia strategies ex PE. 
 

 

[UK]

BRK. Still not overpriced (or even yet below market valuation). Safe, defensive, somewhat resiliet to higher rates etc. I think still way better vs just SNP.

FFH. Also higher rate proof, value/short duration, otherwise not much to add.

JOE. Not much to add. Actually it is old economy stock, but longer duration rates wise. But i like it already, despite of where rates will be.

META, GOOGL, AMZN. META is already value stock:), GOOGL at or even bellow market multiple and AMZN I think at least not overpriced:). As a group of by ~50 per cent, trading at simillar ot cheaper than market valuation, while arguably much better and much faster growing businesses. I think these are also somewhat inflation resilient in terms of their businesses (strong market position, low capex, pricing power), but perhaps would suffer more valuation wise, if rates would be higher, then expected. Maybe TSM could be added to this group.

UMG. Maybe not obviously cheap looking ar current multiples, but really wonderfull business, with tech like growth, yet more long term visibility. Maybe, looking similarly, LVHM is also interesting.

 

[changegonnacome]

Hostelworld (again) - remains ridiculously cheap relative to steady state FCF and prospective growth guided at capital markets day.... final leg of COVID re-opening of HSW regions with Oceania & Asia coming out of the traps in H1 2023 to make it an OTA finally back to running on all regions for the first time since 2019 with its most profitable customers (long haul) back with a vengeance.....+ the continuation of the companies differentiated solo system/social strategy.....the metrics of which are confirming business turnaround obscured by COVID carnage. Recession resistant - given core demographic & lowest cost provider of tourist accommodation across all types. Inflation beneficiary - given capital light nature and carry fee......plus a nice balance sheet/FCF catalyst in 2023 with re-financing/payoff of large high yield COVID loan with cash on-hand ( ~20% of current EV)

Edited January 2, 2023 by changegonnacome

[formthirteen]

There is no such thing as a best idea for me but my top four holdings sorted by total value are:

 

- FFH

- BRK (or BOL + ODET)

- ELF

- MKL

 

What a boring portfolio. Maybe time to rethink the whole thing?

[StevieV]

4 hours ago, formthirteen said:

- BRK (or BOL + ODET)

 

Maybe this is a dumb question, but what is this BOL + ODET as BRK substitute?

 

 

What a boring portfolio. Maybe time to rethink the whole thing?

 

Nothing at all wrong with boring.  I believe ELF = ELF.to.  All 4 in insurance is what sticks out.

[StevieV]

10 hours ago, RedLion said:

+1 on KKR. Not sure if it’s going to be this year or next year, but I feel like one of them is going to be a monster for KKR and you make money buying here for the medium to long term. The valuation is very low, and while the business is very PE heavy they are quickly building their infrastructure, credit, and insurance business. They have a big Asia franchise which I think is a bit competitive advantage and they have a big growth runway on Asia strategies ex PE. 
 

 

 

$500 million of Q4 monetizations as of their recent update.  That's not bad in a slowing monetization environment, but I don't have a good idea for '23.  For comparison, monetizations peaked at $1.15B in Q4 '21.  Been trending down since.

 

As you know RL, that's one component of the value.  They also have the significant book value and the more stable FRE.

 

Not really paying much for the incentive fees (monetizations) if you believe in some multiple of FRE and the book value is worth something.  

[John Hjorth]

25 minutes ago, StevieV said:

 

Maybe this is a dumb question, but what is this BOL + ODET as BRK substitute? ...

 

@StevieV,

 

Companie de l'Odet [ODET.PA] [ Website ] and Bolloré [BOL.PA] [ Website ].

[formthirteen]

48 minutes ago, StevieV said:

Maybe this is a dumb question, but what is this BOL + ODET as BRK substitute?

 

Not a dumb question at all. It's one of these holding companies trading at a 50-70% NAV discount.

 

The reasons for the discount are probably hiding somewhere in the corp structure:

 

 

They just completed the sale of Bolloré Africa for 5.7 billion euro so they had some value hiding there.

 

  

48 minutes ago, StevieV said:

What a boring portfolio. Maybe time to rethink the whole thing?

 

Nothing at all wrong with boring.  I believe ELF = ELF.to.  All 4 in insurance is what sticks out.

 

Yes, ELF.TO. I own ONEX too. The discount is irrational.

Edited January 2, 2023 by formthirteen

[james22]

Small Value

[Williams406]

FRP: Still more units coming on line in 2023. Good cash balance with management team that might find something to do if RE really gets squirrelly.

 

JOE: Demand remains very strong. Development delays have pushed a lot of Camp Creek lot sales to 2023; same story with Origins. Many lodging assets coming on line. Should be very good comps throughout the year.

 

Oil/Gas: Looking for continued shift from debt paydown to divs/repurchases. 

 

Altius: Lots of material, potential catalysts here: Silicon update, Kami feasibility study, IPO for Lithium Royalty Corp.

 

 

[changegonnacome]

35 minutes ago, james22 said:

Small Value

 

As a pond to go fishing in - i totally agree.......I would add an extra kicker for the brave....probably braver than me........Small Emerging Market Value

[SharperDingaan]

Canadian WCSB, plus money off the table.

 

If Canadian o/g goes as many hope, it's going to be quite the ride, and everybody is going to be certain they are brilliant with their 50-150% YTD returns!

When that happens to you .... take most of your money off the table 

 

To quote the famous bumper sticker:  

“Please God, give me one more oil boom. I promise not to piss it all away next time.”

 

SD

Edited January 2, 2023 by SharperDingaan

[MattR]

- Ecopetro

- BTU

- RIG

 

[formthirteen]

2 hours ago, MattR said:

- Ecopetro

 

As an owner of EC I approve of this implicitly. Small position for me so will not move the needle but might provide some excitement one way or the other (dividend, politics, civil war, etc). PBR-A is a similar position. I don't have any conviction and will dump these if they drop (highly likely).

Edited January 3, 2023 by formthirteen

[RetroRanger]

Could Net-Nets be a thing? UK is full of them.

Global Fashion Group, trading under net-cash , owners are the Zalando founders. (Just an example).

 

But twitter is full of them 

[kab60]

Asbury Automotive is still my highest conviction idea LT, but no idea if things get ugly as margins eventually come down so timing is tough. It's a hugely succesful biz with a great LT track record. My edge here? Probably just structural in that I try to take a 3-5 year view.

 

On the less cyclical side, I think Ardagh Metal Packaging looks great. Secular growth (bev can growing 4-6% PA), temporary headwinds (capacity, input costs (aluminum, gas), attractive valuation (not least on 24-25 FCF). Plus a ton of debt, but it's fixed and rather LT, so I like the levered upside. My edge here? Again, mostly structural (2022 was shit (or as shit as it goes in a great industry like bev cans). Not a lot of FCF before 2024-2025). But I'm also comforted by small nuggets of information; rational industry with great compensation schemes (focus on ROIC, not market share).

 

I also like Charter Communications. I stayed away until their recent investor day, as I thought they were being to complacent on competition. But they increased capex plans. Market hated it, it was exactly what I was hoping for. A quick path to gigbit symmetrical speeds and future-proofed for fiber (and opening for fiber on demand). We can debate whether people need 1gigbit symmetrical (most don't), but the marketing claims are valuable and eventually people probably will. Investing in their network so they can eventually roll out fiber everywhere - when it makes sense - seems to futureproof the business. Which you really want considering the levered equity model. I also think their mobile opportunity is underrated the more I think about the whole industry and structure.

 

In tech I think Meta and Pubmatic are interesting. I think they're way too cheap (2-3xTBV, 6-7x EBITDA).

[frommi]

BTI, recession resistant, cheap, has momentum going and pays you while waiting. Debt load from reynolds aquisition finally under control and still growing 5-8% per year.

[tnathan]

A few picks: BIG & MATV. Both of these stories are essentially margin recovery plays that have been beaten up due to what I believe are transition quarters related to inflation. Margins should recover for both of them over the next 4-6 quarters.

 

Edit: Also adding on GRFS. They seem to be getting much more serious on the investor communication piece (it is family owned) and more focused on the business. The plasma market had a huge shortage during COVID - this should normalize moving forward and they will be able to pay down their massive pile of debt over time. The market itself is extremely attractive and a secular grower...they are in an oligopoly with a long runway, and if the business gets managed better over time you can see huge margin expansion here and with the debt paydown it could springboard higher.

Edited January 3, 2023 by tnathan

[Pelagic]

On 1/2/2023 at 11:00 AM, SharperDingaan said:

Canadian WCSB, plus money off the table.

 

If Canadian o/g goes as many hope, it's going to be quite the ride, and everybody is going to be certain they are brilliant with their 50-150% YTD returns!

When that happens to you .... take most of your money off the table 

 

To quote the famous bumper sticker:  

“Please God, give me one more oil boom. I promise not to piss it all away next time.”

 

SD

 

Is this a play on the trans mountain expansion or a more general normalizing of WCS differentials from $27 to something in the $15-20 range? Hard to get a sense of how much the expansion that should come online this year or early next is going to impact spreads. If they're lower than average to end the year thanks to the extra takeaway capacity it seems like it could be a big win for a lot of producers.

[Dinar]

1 hour ago, frommi said:

BTI, recession resistant, cheap, has momentum going and pays you while waiting. Debt load from reynolds aquisition finally under control and still growing 5-8% per year.

I think that you will regret your choice.  BTI is losing volumes at 3%+ per annum, and even faster in the more profitable US market.  Revenues barely grew by 3-4% in 2022 in constant currency despite 10% inflation.  I would not touch it and Altria with a ten foot pole.  PM (which I own) is a much better choice in my opinion.

[ValueArb]

I'm a net-net guy so here are two.

 

Seritage (SRG) - Sears real estate holdings being liquidated. Trading at $12 which is roughly book value while company distribution range is $18-$27 so they expect to sell properties for significantly over carrying values and so far looks like that is happening. Risks are it's fairly levered, if sale prices come in under book that equity disappears rapidly. And it's an Eddie Lampert play and he's been selling.

 

TCI - A family owned apartments business, trading $44 with a $90 book value. They just unwound a big joint venture carried at way under market value, which massively increased book value. Its a complex structure, it's 80% owned by another public company that is 80% owned by the founders family, and one of their subs issued bonds on the Israeli exchange, but its simplifying. The founder died a few years ago and they've been selling properties the last few years so my thesis is they will want to sell it or  break it up. Risks are the family may want to double down on new real estate or businesses, and its a value trap without a catalyst. But I don't get along that well with my siblings so that makes me bet they all have different ideas of what they'd like to do and will just find the most tax favorable way to break it up.