The FTSE 100 is almost exactly where it was a year ago, flat at around 7,500 points. Only roughly a quarter or so of the shares in the index are actually up so far in 2022. Here’s three of those stocks, all of which I think are well positioned to continue outperforming in 2023.
Europe’s largest oil company
One stock easily beating the FTSE 100 this year is Shell (LSE: SHEL). The share price is up over 38% since January, driven higher by elevated oil and gas prices.
In fact, the firm’s adjusted earnings for the first three quarters of 2022 are almost double what they were for all of 2021. And Shell remains on course to generate an eye-popping $30bn in free cash flow for the year.
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The stock has also been buoyed by aggressive share repurchasing programmes. Buybacks now total almost $19bn for the year. The dividends payouts have increased too. Nobody can accuse Shell of not being shareholder friendly.
Unfortunately, I also don’t foresee an end to the war in Ukraine any time soon. So the company looks set to continue generating very strong earnings in a high-price energy environment.
Yet I won’t be adding any shares to my own portfolio. I suspect that the government’s extended wind-fall tax on oil producers may deter the company from increasing its investments in its own net-zero objectives.
Analytics expert
London Stock Exchange Group (LSE: LSEG) has been a stellar long-term performer. The stock is up 117% in five years, and 802% over 10 years. And it’s risen an impressive 16% this year.
Beyond owning the London Stock Exchange, the company is one of the world’s leading providers of financial markets infrastructure. That includes delivering accurate financial data, analytics, news, and index products to more than 40,000 customers in 190 countries.
In fact, around 70% of the group’s revenue now comes from the data and analytics side of the business. This helps the company make a lot of cash. In the first half of 2022, it reported strong income growth across all divisions, generating adjusted operating profit of £1.4bn.
Management has indicated that there’s a “healthy pipeline” of companies waiting to go public. This bodes well for the stock price into next year.
However, if these IPOs don’t materialise, appetite for the shares could weaken. Still, the stock has made it onto my buy list for 2023.
Growing orders
The third stock I see beating the index again next year is BAE Systems (LSE: BA.). The share price is up 44% year to date.
The arms contractor is seeing increasing demand from countries wanting to beef up their defence capabilities in the wake of Russia’s invasion of Ukraine. Unfortunately, I don’t see this as a short-term phenomenon. This is probably part of a longer-term geopolitical backdrop.
Order intakes at the firm have topped £28bn so far this year. That exceptionally strong order book will lead to years of growth, the company has indicated.
One risk for this defence stock would be a reduction in UK and US military spending, as these two nations account for the bulk of the firm’s sales. However, I don’t see this happening, and I’m actually intending to buy BAE shares before December.
