Skilled investors have one thing in common: They see opportunities in bear markets. Yet what you buy in a market downturn can be just as important as when you buy. To limit the chance you’ll feel buyer’s remorse next year, turning to stocks with strong fundamentals can take your portfolio a long way.
Bank of America analysts recently outlined 11 key stock picks that investors should consider in the new year. “Given our house view that 2023 could be a tale of two halves—a recession and a recovery—stocks may fare differently in these two periods,” the analyst team led by equity strategist Savita Subramanian wrote.
Investment analysts agree that the year could see a split in how the market is defined, and investors should consider factors that make investments attractive in the long term. “While last year couldn’t end fast enough for investors, we caution that this year may still offer several early challenges, before firming in the second half of the year,” explained John Lynch, chief investment officer for Comerica Wealth Management. Lynch argued that investors should turn to value stocks over growth during times of economic turbulence. “The value space offers short duration equities, which are less impacted by market interest rates and can be found in the industrials, materials, and financial services sectors,” said Lynch.
Strong free cash flows and healthy balance sheets are the name of the game in times of economic rockiness, and consumer staples like Walmart fare well even when many consumers are budgeting. Some stocks, like Arch Capital Group in the financials sector, are beneficiaries of lower interest rates that are triggering a recession.
Here are the 11 stocks recommended by Bank of America for 2023:
Fox Corp. Class A, FOXA
The media behemoth Fox is positioned for tailwinds from its recent sports betting vertical, according to Bank of America analysts. Bank of America projects that the stock, which trades at $30.27 per share as of January 3, will be on the road to recovery in 2023.
Tractor Supply Co., TSCO
In the consumer discretionary sector, Bank of America singled out the farm equipment distributor as a stock to buy based on the strength of its balance sheet, domestic sale numbers, and the company’s environmental, governance, and social (ESG) rating. Shares currently trade at $223.18 as of January 3.
Walmart Inc., WMT
The retail giant reigns in the consumer staples sector according to Bank of America. The high-quality stock has a favorable ESG rating from Bank of America and benefits from consumers who might be trading down if the economy worsens. Shares currently trade at $143.6 as of January 3.
Exxon Mobil Corporation, XOM
In the energy sector, Bank of America projects that Exxon Mobil has the highest upside potential in 2023. The stock is currently trading at $106 as of January 3. Bank of America analysts point to the oil producer’s strong free cash flow yield, as well as the fact that the stock is underweighted by long-only held funds as evidence of the stock’s projected strength.
Arch Capital Group Ltd., ACGL
In the financial sector, Bank of America zeroed in on Arch Capital Group due to the fact the company is a beneficiary from volatility caused by lowered interest rates. The stock is in Bank of America’s Alpha Surprise Screen, which includes inexpensive, out-of-consensus stocks, and shares trade at $62.46 as of January 3.
Humana Inc., HUM
The health insurance firm is positioned for growth due to its high-quality rating from Bank of America and the fact that health insurance is a somewhat recession-resilient sector. Currently trading at $500.49 per share, the company also has high ESG ratings and has seen significant earnings per share growth.
Honeywell International, HON
In the industrials sector, Bank of America singled out aerospace technology producer Honeywell as a stock to buy due to its quality and ESG rating from Bank of America. The company also benefits from automation and decarbonization trends. Shares trade at $214.3 as of January 3.
Analog Devices, Inc., ADI
Bank of America cites semiconductor manufacturing firm Analog’s strong free cash flow, high quality, and high value as reasons that the stock could be attractive this year. Currently trading at $62.46, the stock is considered a 20% discount within the information technology sector by Bank of America due to its high value.
Mosaic Company, MOS
Within the materials sector, Bank of America recommended fertilizer company Mosaic as a buy due to its market position and high ESG rating. Shares currently trade at $42.63.
Welltower Inc, WELL
In the real estate sector, Bank of America projects that senior housing provider Welltower has recovery ahead after pandemic-induced losses. The company has strong dividend yields, high quality ratings, and positive ESG ratings. Shares currently trade at $66.95 per share.
Duke Energy Corporation, DUK
The energy company has a defensive dividend yield and solid quality rating, which makes it Bank of America’s pick within the utilities sector. Shares, which trade at $103.7 per share, are 50% underweight by long onlies. The company also has positive ESG ratings.
This article is part of Fortune’s quarterly investment guide for Q1 2023.