Finimize Analysts’ 2023 Investment Ideas: Ranked, Revisited, And Reassessed

Back in December, I asked our crack team of analysts to jot down their top investing ideas for 2023. The resulting bundle was an interesting and diversified portfolio of themes. Now, we eat our own dog food here at Finimize HQ, so it’s time to take a six-month review of how our predictions fared and weigh up whether they’ll stand a chance going forward.

The Finimize Portfolio

Before we get specific, let’s take a look at the whole list of ideas, ranked by performance.

Performance of Finimize analysts’ investment ideas for the first half of 2023 (to 30th June). Performance is measured in the domestic currency and on a total return (i.e. including dividends) basis. Source: Koyfin.

If you take a straight average of our analysts’ ideas, the whole portfolio would’ve pulled in a 21% return. Or you can assume that each analyst was given an equal weighting of the overall spread, and subdivide those chunks for analysts with multiple ideas. Such a portfolio would’ve brought in returns of 23%.

That’s pretty good going, if we say so ourselves. And we didn’t compromise on diversification either: the portfolio includes a mix of UK, US, European, and Chinese stocks, plus crypto, commodity-tracking ETFs, and direct commodity investments. There were a couple of ideas that lagged behind, sure, but overperformers pulled the overall bunch up. Remember: a well-balanced portfolio should include assets that move in different directions, so it would be a flapping red flag if all of the picks had done well.

There are a couple of other things you might notice. One, a lack of bonds. That’s paid off this time because, as our team expected, interest rates put bond returns on ice. And two, the absence of tech – specifically artificial intelligence – investments, but that was likely just because the hype hadn’t yet kicked off when we drafted these ideas. If we started fresh today, I wouldn’t be surprised to see a couple of super-high-tech ideas crop up.

Idea 1: Clean and dirty energy (Energy Select SPDR ETF, BHP, Rio)

Russell had a laundry list of reasons fueling his optimism about commodities, including oil and gas. Sectors were tight on production capacity (which can buoy up prices), China’s reopening was poised to drive demand, and the US was replenishing its oil reserves. And in the longer term, a shift to cleaner energy could be a windfall for metals like copper, nickel, and lithium.

And Russell reckons most of those reasons still hold weight. Even though Chinese demand fell short of expectations and oil supply’s been more bountiful than expected, China could still bounce back over the coming months and gobble up more oil. And the long-term clean energy trend only seems to be strengthening, which should eventually support commodities. Finally, energy and commodity stocks are sitting at decent values. In short, Russell’s happy to stick with his picks.

Idea 2: Copper (Global X Copper Miners ETF)

Luke’s copper call was based on two factors. First, copper is a crucial component in the long-term clean energy trend, especially electric cars and renewable energy generation. Second, he expected the US dollar to drop against other currencies, increasing the value of commodities that are bought and sold in dollars.

The dollar’s only slipped a little so far, but Luke still believes it could fall further – especially as the US has a chance at stalling interest rate hikes now that inflation seems calmer than, say, in the UK. And while the copper ETF has managed an okay 8% return so far, Luke reckons a long-term supply shortage of the metal could bring that figure up in the future.

Idea 3: US homebuilding (TopBuild)

Paul identified TopBuild as a high-quality company with a leading market share in an industry with a “fragmented” customer base (that means there are a lot of customers, so a few can’t have an outsized impact on its business). That’s usually a strong position to be in, all else equal. Add in that the stock was cheap, pricing in a very negative outlook for the US housing market, and the opportunity suited Paul’s long-term mindset.

Taking stock now, Paul sees the US housing market starting to stabilize, with more new homes being built. And with the market in a chronic supply shortage, there should be plenty more bricks to be stacked at some point. That would be good for TopBuild: insulation, the firm’s core product, is a key component in any home, especially those wanting to meet stricter environmental rules. Oh, and Paul says to watch out for supportive legislation on that at some point too. All in all, he stands by TopBuild as a top multi-year investment.

Idea 4: Chinese stocks (SPDR S&P China ETF, iShares MSCI China A ETF)

Daniel predicted that China would scrap its zero-Covid policies before the government had even got there itself. What’s more, he thought the Chinese stock market would take off as a result. He might’ve been right initially, but China’s economy and stock market have dozed off to sleep lately.

But stick with it, says Daniel. Expectations are low for Chinese economic growth, sure, but that means you could get a surprise upside – especially now there’s new hope that US-Chinese relations might be thawing. And with the Chinese market down in the dumps, the country’s stocks could be a bargain.

Idea 5: Blue-chip cryptocurrencies (bitcoin, ether)

Former Finimize analyst Jonathan Hobbs went against the grain when we gathered these ideas, palming off the narrative that crypto was dead. Instead, he believed long-term holders remained positive and, with the prospect of falling interest rates in 2023, he was optimistic too.

Since then, crypto’s taken off – but not necessarily the way Jon had predicted. Cryptocurrencies are generally positively correlated with tech stocks, so the AI frenzy has given digital currencies a leg up so far this year. Plus, crypto’s proven itself as a strong inflation hedge and even got a chance to flaunt its potential status as an alternative to the centralized banking system during the bank crises and fallout.

Idea 6: Industrial gas companies (Air Products, Air Liquide, Linde)

Theodora is something of an expert in this sector, and she felt positive about these so-called “all-weather” investments. See, industrial gas firms offer defensive characteristics like long-term guarantee-like contracts, and the industry’s highly consolidated too. At the same time, some elements of the industry move in tandem with economic cycles, and demand for gasses should rise as the economy strengthens. These stocks are the perfect blend of defense and offense, says Theodora.

Two of these picks took off, with only Air Products lagging for company-specific reasons. No surprise, then, that Theodora still believes these are solid long-term investments: she reckons they’ll do well if the market dips, and that the long-term clean energy theme – think hydrogen – should support them too.

Idea 7: Gold (Goldman Sachs Physical Gold ETF)

Stépane figured that a combination of falling interest rates, sticky inflation, and a sliding US dollar would be a boon for the price of the yellow metal. And he was mostly right: inflation has proven sticky, the dollar’s slightly down versus other currencies, and rates were once forecast to calm by the end of the year – although that’s less certain now. Most importantly, gold has racked up a roughly 5% gain this year.

Now, other assets like tech stocks have rallied much more than that. But that shouldn’t take the shine off gold: if anything, it’s even more attractive when stacked against the lofty valuations of those tech stocks. And because cheery ol’ Stéphane thinks the delayed impact of aggressive rate hikes will hit the economy hard later this year, he predicts rates will fall fast in the future. In that environment, gold would be a port in the storm for investors, so it would continue to be a valuable portfolio diversifier.

Idea 8: Trading down beneficiaries (H&M, Deliveroo, Tesco, B&M, Just Eat Takeaway.com, Inditex, ABF, Domino’s Pizza)

Last but not least, my own big idea. It seemed clear to me at the start of the year that the UK was in for a rough ride, likely to be whacked by a recession at some point. (And okay, that hasn’t happened yet, but inflation’s especially robust in the UK and Brits are strapped for cash.) To me, that was a sign everyday folks would be looking to make their pounds go further by switching to cheaper alternatives, so I thought that a “trade down” theme would puff up certain firms.

On the whole, I’d say I was right. And I’m not just tooting my own horn: most of the eight “trade down” beneficiaries I picked have done well so far. Now, with other investors waking up to the theme, it’s clear a few of those share price valuations are feeling the love: these names certainly aren’t as cheap as they were. But looking forward, I think the UK’s far from out of the woods so I’d stand by this play, especially for firms with solid long-term business models.

What could go wrong?

This isn’t a trick question: all of these investment ideas come with risks, so the answer is “a lot”. You can check out the risks of our analysts’ specific ideas in the original Insight. It’s only been six months so far, so they’re still relevant today.