In this article, we discuss the 12 best stocks in each sector. To skip the detailed analysis of how the sectors performed in 2023, go directly to the 5 Best Stocks In Each Sector.
The Global Industry Classification Standard (GICS) was developed by Morgan Stanley Capital International [now MSCI Inc. (NYSE:MSCI)]. It is a framework that classifies and categorizes companies into different industry groups based on their primary business activities. The GICS has a hierarchical structure with four tiers, which are sectors, industry groups, industries, and sub-industries, written in order.
In 2023, the technology sector took the whole market by storm. Generative AI trends proved to be quite beneficial for the sector. The Nasdaq Composite index gained 37.34% year-to-date (YTD), compared to 19.15% YTD gains of the S&P 500 index on November 22. However, it is important to note that these gains are attributed to the companies that fall within the communication services and IT sectors. Technology Select Sector SPDR Fund (NYSE:XLK) is up nearly 50% YTD. Among the tech stocks, NVIDIA Corporation (NASDAQ:NVDA) has been the performer of the year as the company touched the trillion-dollar market cap mark at the end of May, and its stock price is up over 240% YTD.
The worst-performing sectors have been healthcare and utilities. The healthcare sector is down 7.46 % YTD, while the utilities sector showed a decline of -5.90%. As per our previous report, the solar power segment among the utilities sector has been one of the worst performing industries in the market, as Global X Solar ETF (NASDAQ:RAYS) was down nearly 45% by the end of October. Nevertheless, November has been a better month for the industry as the ETF has gained around 6.5% since our article was posted. The financial sector hasn’t performed well either in the growing interest rate environment. Even though the sector as a whole still has positive YTD growth, the banking industry was hit quite roughly in 2023 due to the Silicon Valley Bank crisis. SPDR S&P Regional Banking ETF (NYSE:KRE) is down nearly 24%. Similar to the Global X Solar ETF (NASDAQ:RAYS), the SPDR S&P Regional Banking ETF (NYSE:KRE) has also made significant gains in November as the fund is up 11.32% month-to-date.
Market Conditions in Q3 and Future Forecast
In the first six months of the year, the S&P 500 gained nearly 16.4%, including an 8% gain in the second quarter. These gains proved to be damaging for pessimistic investors. The “Big Short” investor, Michael Burry shorted the stock market in Q2 and placed an $887 million bet against the SPDR S&P 500 ETF Trust and $738 million against Invesco QQQ ETF, which tracks the NASDAQ 100. The investor closed these positions in the third quarter after a probable 40% loss. Nevertheless, Burry found new targets to short in the third quarter, and he opened $47.365 million worth of PUT options against the iShares 7-10 Year Treasury Bond ETF and $7.709 million against Booking Holdings Inc. (NASDAQ:BKNG).
Compared to the first half of the year, the third quarter was less than favorable for the stock market. While the S&P 500 was up 3.11% in July, August and September showed declines of 1.77% and 4.87%, respectively. The total Q3 decline for the S&P 500 was recorded at 3.65%. It further declined by 2.20% in October but is up 7.52% month-to-date on November 22. Energy was the best-performing sector in Q3 due to an increase in prices caused by OPEC and Russia supply cuts and geopolitical tensions caused by the Israel-Hamas conflict. The Energy Select Sector SPDR Fund was up nearly 11.4% in the quarter. Two of the best-performing energy stocks were Marathon Petroleum Corporation (NYSE:MPC) and Phillips 66 (NYSE:PSX), gaining nearly 30% and 26%, respectively.
However, the rest of the market did not perform well. The real estate sector has been one of the worst performing sectors throughout the year and declined by 9.7% in the third quarter, while the utilities sector was down 10.1%. Even the Invesco QQQ ETF, which has been performing really well across the year and is up 47.5% YTD, declined by 3% in the third quarter.
According to a Bloomberg report, Bank of America believes that the S&P 500 index will rise around 10% from November 22 levels by the end of 2024 and close at a record 5,000. The BofA team led by Savita Subramanian wrote:
"The market has absorbed significant geopolitical shocks already and the good news is we're talking about the bad news."
The firm further added:
"Macro signals are muddled, but idiosyncratic alpha increased this year. We're bullish not because we expect the Fed to cut, but because of what the Fed has accomplished. Companies have adapted (as they are wont to do) to higher rates and inflation."
On the pessimistic side, Morgan Stanley doesn’t believe that the market will go up from the current levels and set the S&P 500’s 2024 target at 4,500. Goldman Sachs has a slightly better outlook at 4,700. Wells Fargo has a target between 4,600 to 4,800, and UBS keeps it at 4,700 by the end of next year.
Keeping the market conditions and forecasts in perspective, some of the best stocks to buy from different sectors include Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META).
12 Best Stocks In Each Sector
A close-up view of a stock market floor, traders bustling around the trading board.
Our Methodology
For this article, we chose one stock from each sector of the market as per the Global Industry Classification Standard (GICS). We picked one stock from each sector that had the highest number of hedge fund investors as of the third quarter of 2023. We used Insider Monkey's proprietary database of 910 hedge funds to gauge hedge fund sentiment around stocks.
We chose SPDR S&P 500 ETF Trust (SPY) as our 12th stock as it tracks the S&P 500 index and stocks from all 11 sectors of the market. All of the stocks, except SPY, have been listed in ascending order of their hedge fund sentiment as of the third quarter of 2023.
SPDR S&P 500 ETF Trust (NYSE:SPY) is an exchange-traded fund (ETF) that tracks the S&P 500 stock market index. The fund’s results and yield performance coincide with the S&P 500 index before expenses. SPDR S&P 500 ETF Trust (NYSE:SPY) is the largest and oldest ETF in the world and was launched in 1993.
Between 2012 and 2022, the SPDR S&P 500 ETF Trust (NYSE:SPY) only showed negative returns twice. Once in 2015 and later in 2022. Last year was the worst year of the decade for the fund, showing a decline of 15.53%.
Vanguard S&P 500 ETF (VOO) and iShares S&P 500 Index (IVV) also track the S&P 500 index along with SPDR S&P 500 ETF Trust (NYSE:SPY).
NextEra Energy, Inc. (NYSE:NEE) is a Florida-based energy company involved in gas infrastructure and generating and distributing electricity using different sources. The company provides its services through its subsidiaries, Florida Power & Light Company, NextEra Energy Resources, LLC, and others.
Over the last three months, 18 Wall Street analysts covered NextEra Energy, Inc. (NYSE:NEE)’s stock, and 14 analysts kept a Buy rating on the shares. Their average price target of $70.81 represents an upside of 23.21% as of the November 22 market close.
On November 6, NextEra Energy, Inc. (NYSE:NEE) announced that it has agreed to sell NextEra Energy Partners, LP (NYSE:NEP)’s south Texas natural gas pipeline assets to push the company to reach its real zero 2040 goal. Kinder Morgan (NYSE:KMI) has agreed to buy STX Midstream for $1.815 billion in cash and short-term borrowings.
Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META) are the best stocks in their respective sectors to buy along with NextEra Energy, Inc. (NYSE:NEE).
Madison Investments mentioned NextEra Energy, Inc. (NYSE:NEE) in its third quarter 2023 investor letter. Here is what it said:
“Although NextEra Energy, Inc. (NYSE:NEE) reported an in-line second quarter, the stock has been weak primarily because of rising interest rates. NextEra also reported slower renewables backlog growth than expected. We do not view this as an issue as we expect the development pipeline timeline may not be as predictable as investors would like. The environment for renewables remains favorable both from a demand perspective as well as cost perspective.”
American Tower Corporation (NYSE:AMT) is a Massachusetts-based real estate investment trust that leases broadcast communications infrastructure and offers optimization of wireless communication networks.
On November 10, American Tower Corporation (NYSE:AMT) announced that it will strengthen its position in Africa as its subsidiary, ATC Africa, entered into a multi-year agreement with MTN Nigeria. Under the agreement, ATC Africa will provide MTN Nigeria with new tenancies, which is estimated to improve wireless connectivity across Nigeria.
On October 26, American Tower Corporation (NYSE:AMT) reported Q3 funds from operations (FFO) of $2.58 per share and revenue of $2.82 billion, which beat the analysts’ estimates by $0.07 and $60 million, respectively. The quarter’s property revenue grew by 7.0% to nearly $2.82 billion, while the adjusted EBITDA saw a growth of 10.4% to $1.8 billion.
American Tower Corporation (NYSE: AMT) was mentioned in Andvari Associates’ third quarter 2023 investor letter. Here is what it said:
“After good results for the first half of the year, Andvari’s performance suffered at the end of the third quarter for two reasons. First, renewed fears of interest rates remaining higher for longer impacted multiple holdings that are most sensitive to rates. These include companies like American Tower Corporation (NYSE:AMT) and Digital Bridge. American Tower is a REIT (real estate investment trust) that owns and leases antennae space on cell towers while Digital Bridge is an investment manager that invests in the digital infrastructure space. Both companies require debt in their operations and the prospect of higher interest rates continues to impact share prices in the short term.
Teck Resources Limited (NYSE:TECK), formerly known as Teck Cominco, is a diversified company that is engaged in the metals and mining industry. The company’s product portfolio includes fertilizers, steelmaking coal, silver, and more.
On November 20, Teck Resources Limited (NYSE:TECK) announced a 400 million share repurchase program for Class B subordinate voting shares. The company has received regulatory approval from the Toronto Stock Exchange for the program, which will commence on November 22, 2023, and end on November 21, 2024.
On November 10, it was reported that Teck Resources Limited (NYSE:TECK) will invest in American Eagle Gold (OTC:AMEGF). Through an investment of $435,375 to buy 2.025 million common shares at $0.215 per share, the corporation will have a 19.9% stake in American Eagle.
13 Wall Street analysts have covered Teck Resources Limited (NYSE:TECK)’s stock over the last three months, and all maintain a Buy rating on the shares. The average price target is $47.67, which shows an upside of 31.03% as of the November 22 market close.
Exxon Mobil Corporation (NYSE:XOM) is one of the largest oil and gas companies in the world and is involved in the discovery, exploration, development, and production of crude oil, natural gas, and natural gas liquids.
On November 20, Exxon Mobil Corporation (NYSE:XOM) reported that the first phase of operations in Arkansas had begun. The corporation aims to be the top producer of lithium and meet the manufacturing needs of over 1 million electric vehicles per year by 2030. The production is set to begin by 2027.
According to Insider Monkey’s database that tracks 910 elite hedge funds, 79 funds had investments in Exxon Mobil Corporation (NYSE:XOM) in the third quarter, up from 71 in the previous quarter. Jean-Marie Eveillard’s First Eagle Investment Management was the most prominent stakeholder in the company, with 13.19 million shares worth $1.55 billion.
On November 16, it was announced that Exxon Mobil Corporation (NYSE:XOM) has plans to make an investment of approximately $15 billion in Indonesia on petrochemical projects and carbon capture and storage facilities. It follows the news of the company evaluating $2 billion in investments with Indonesian state energy company Pertamina. The investment is for carbon capture facilities using two underground basins in the Java Sea.
Kenvue Inc. (NYSE:KVUE) was the consumer health unit of Johnson & Johnson (NYSE:JNJ) and was spun off in early 2022. It sells consumer healthcare products under the brands Tylenol, Neutrogena, Listerine, Johnson’s, Band-Aid, Aveeno, Zyrtec, and Nicorette.
On October 26, Kenvue Inc. (NYSE:KVUE) announced a share repurchase program for up to 27 million or nearly 1.4% of the company’s outstanding shares.
On October 27, Canaccord decreased the price target on Kenvue Inc. (NYSE:KVUE)’s stock to $27 from $28 while maintaining a Buy rating. The firm mentioned that the company’s third quarter’s mixed results, narrowed annual guidance, and the Neutrogena brand’s weakness still needs time to recover.
On October 26, Kenvue Inc. (NYSE:KVUE) released its Q3 earnings result with a non-GAAP EPS of $0.31, which was in-line, and revenue of $3.92 billion grew by 3.4% year-over-year (YoY), which surpassed the estimates by $10 million.
Union Pacific Corporation (NYSE:UNP) is a Nebraska-based railroad holding company that is mainly engaged in the transportation of agricultural products, industrial products, coal, and more.
In the third quarter, the hedge fund sentiment was positive toward Union Pacific Corporation (NYSE:UNP) as 90 hedge funds held a stake in the company, up from 84 in the second quarter. One of the most prominent investors in the company was Dmitry Balyasny’s Balyasny Asset Management, as it upped its stake by 171% to 2.164 million shares worth $440.79 million.
Out of the 16 Wall Street analysts that covered Union Pacific Corporation (NYSE:UNP)’s stock over the last 3 months, 11 kept a Buy rating. The average price target of $244.38 shows an upside of 9.35% as of the November 22 market close.
Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META) are some of the best stocks to buy besides Union Pacific Corporation (NYSE:UNP).
Cooper Investors talked about Union Pacific Corporation (NYSE:UNP) in its third quarter 2023 investor letter. Here is what it said:
“The major focus in Texas was spending a day visiting operations of Union Pacific Corporation (NYSE:UNP), a Stalwart investment made earlier this year.
