Opinion: Best investment options for FY 2023

There tends to be two major hurdles when moving from a saver to an investor. The first is simply getting started and the second is figuring out what to invest in.

Outlook & stock picks for investors in FY 2023

Bell Direct Market Analyst, Grady Wulff, takes you through Bell Potter’s FY23 Analyst Outlook & Stock Picks Report, to help you decide what stocks you may want to consider investing in.

A common theme of the report is the impact that rising interest rates has had on specific sectors of the market, with a number of stocks poised to benefit from key gaps in some sectors, recovering demand in other sectors, and the global shift to a greener future.

Below are some other stocks that you may want to explore and research further.

Related article: How to pick a winning stock like an analyst

Agricultural & fast moving consumer goods (FMCG) stock picks

Stocks of this sector come with volatility and should be considered a high-risk investment. For this reason, stocks in focus have either a structural uplift in return-on-invested-capital (ROIC), cyclical growth opportunities, or counter-seasonal crop exposures.

Select Harvests (ASX:SHV) has been included in the stocks picks list for FY23 as Bell Potter sees SHV to be exposed to a favourable asset revaluation cycle and the potential for more favourable almond prices.

NuFarm (ASX:NUF) is another agricultural stock to watch in FY23 amid the anticipated emergence of growth opportunities through new seed revenue streams (carinata and omega-3).

Costa Group (ASX:CGC) is strongly positioned to benefit in FY23 from a return on the company’s ~$540m capital investment. The company’s high presence in key categories experiencing favourable YTD pricing trends provides a buffer against inflation which is driving their costs higher.

Technology stock picks

Given the likelihood that interest rates will continue to rise at an aggressive rate both domestically and overseas, technology stocks that made the list had reasonable cash flow and earnings, strong growth outlook and relevance, especially in the global post-pandemic environment.

Technology One (ASX:TNE) remains on the list as the combination of higher recurring revenue and a higher margin from the software as a service (SaaS) solution migration is expected to drive double digit earnings growth for years to come.

With two recent acquisitions to expand its product offering, and the expectation to become cash flow positive from Q4 FY23, Life360 (ASX:360) also remains on the list for the year ahead.

Nitro Software (ASX:NTO) is a new addition to the list based on the productivity software company’s recent switch to the increasingly popular subscription revenue model, which now represents two-thirds of the company’s total revenue.

Healthcare stock picks

The biotechnology sector has been hit hard by a market correction over the last 12-months, so the focus is now on healthcare stocks with sufficient capital to carry on through this downturn and with assets in areas of high unmet need.

Telix Pharmaceuticals (ASX:TLX) has a strong balance sheet and stellar progress toward commercialization for its first radiopharmaceutical drug (Illucix) in the US, where it stands as just one of three competitors in an addressable market size above US$1bn annually.

Paradigm Biopharmaceuticals (ASX:PAR) and Avita Medical (ASX:AVH) both remain well capitalised while expecting to release major clinical trial results in the near future.

Other inclusions for the healthcare sector are Aroa Biosurgery (ASX:ARX), Pacific Edge (ASX:PEB) and Immutep (ASX:IMM) for their respective unique product offerings.

Base Metals and Gold stock picks

Commodities stocks have been hit by aggressive domestic and international monetary policy action, in addition to supplies remaining constrained by COVID restrictions, logistical disruptions and lack of investment.

Despite demand and outlook for copper softening, Aeris Resources (ASX:AIS) is believed to be trading at an extraordinary discount and has the most compelling ASX copper exposure according to Bell Potter. AIS is debt-free and boasts a combination of exploration and acquisition success driving positive step-changes for mine life extension and production growth.

Australia’s largest nickel producer on the ASX, Nickel Mines (ASX:NIC), remains a key stock to watch in CY22 following the successful commissioning of the Angel Nickel Project and the company being on track for earnings growth over 60%.

For gold stocks though, the sector’s resilience is highlighted in the face of skyrocketing real interest rates and the US$ Index rising to 20-year highs. As the risk potential for a stagflation environment rises, gold’s safe-haven nature is viewed as an important exposure for investors to maintain.

Capricorn Metals (ASX:CMM) is a front-running gold stock to watch in FY23 following record gold production in the CY22 June quarter, as well as the company remaining as one of the lowest All-In-Sustaining-Costs (AISC) and most cash generative producers in the sector.

Energy & Strategic Minerals stock picks

Again, the common theme of tightening monetary policy and other macroeconomic factors are at play when assessing the energy and strategic mineral stocks to watch in FY23.

Despite outlook uncertainty in the sector, Bell Potter is keeping a watchful eye on Beach Energy (ASX:BPT) based on the company’s fully funded growth ambitions, production capacity increases and timely entrance into global LNG markets, boosted by the company’s recent finalisation of an LNG sale and purchase agreement with BP.

Emerging uranium producer Boss Energy (ASX:BOE) is also poised to capitalise from continued recovery in uranium markets following strong activity in the June quarter.

As auto manufacturers around the world ramp up EV production, sustained strong demand for battery minerals is likely to continue.

Liontown Resources (ASX:LTR) is independent and debt free which places it in a strong strategic position in a market facing supply shortages, especially after signing spodumene concentrate offtake agreements with Tesla, LG and Ford.

Alpha HPA (ASX:A4N) and Arafura Resources (ASX:ARU) join Liontown Resources on the watchlist for FY23, also due to their respective inputs to the growing EV market.

So there you have it, the 20 stocks that some analysts recommend exploring further. As always you will have to select stocks that are right for your individual circumstances. It’s a good idea to follow four important investment principles when investing.

Four investment principles

Firstly, focus on an investment goal. For example, saving for a new car, saving for a house deposit, and saving for retirement. Remember it’s time in the market, not timing the market, so starting your investment journey now is very important.

Secondly, decide on an investment timeframe. Break down your investment goals into short, medium, and long-term goals. This will determine the investment timeframe for each goal.

Thirdly, keep costs low. With an array of low-cost investment options now on the market, it pays to shop around for the right investment product for you. You don’t have to pay yearly management fees on a portfolio of stocks that you select yourself.

Lastly, diversify to minimize risk. How you choose to invest across different asset classes is known as your strategic asset allocation. Most investors have a mix of growth assets such as shares in their portfolio, along with more defensive assets like fixed income and cash.

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