CNBC’s Jim Cramer on Wednesday highlighted tech and real estate stocks he thinks could perform well in 2023, after a dismal year for both sectors.
Rising interest rates presented challenges for the technology and real estate industries in 2022. Information technology is down 27% so far this year, at Wednesday’s close, while real estate has fallen 28.4% over the same stretch. The only S&P 500 sectors to underperform are consumer discretionary, down 36.2%, and communications services, down 40.3%.
Cramer said he thinks technology and real estate will continue to struggle next year; However, the technology could start to see its fortunes improve after the first half of 2023.
Technical choices for 2023
Oracle’s fiscal 2023 second-quarter earnings last week were “magnificent,” Cramer said. The share is sold for less than 17 times forward earnings. While enterprise software is hardly Cramer’s favorite industry right now, he said Oracle’s business appears “very durable.”
Cramer said he likes Broadcom’s diversification strategy, including the pending deal to buy VMware. Broadcom shares also offer a dividend yield of about 3.3%, allowing investors to be patient while the acquisition goes through regulatory review, he said. The company also recently announced a $10 billion share buyback program.
Palo Alto Networks is not in the S&P 500. Still, Cramer said he believes it is the best-run cybersecurity company operating in an industry that has long-term staying power in the digital age. While Palo Alto Networks reported better-than-expected results last month, Cramer noted that the stock is not too far off its 52-week closing low of $142.21 on Nov. 4. “I recommend picking up some now here and maybe some. more in weakness,” he said.
Property selection for 2023
Cramer said he likes Realty Income because the top retail tenants — such as Dollar General, Walgreens and 7-Eleven — have businesses that can hold up during a potential recession. “Best of all, this company is a dividend machine; they pay a monthly dividend,” he said, “and tend to raise it several times a year. Currently, the stock is yielding 4.6%.”
While shares of Federal Realty have fallen about 25% in 2022, Cramer said the stock has been a solid long-term performer. Its current dividend yield is 4.25%. Cramer said Federal Realty’s specializes in mixed-use properties, many of which are in affluent suburbs. That’s remarkable given concerns about a potential recession.
Cramer said the logistics-focused real estate investment trust, or REIT, has continued to perform strongly even as the stock has fallen about 31% so far this year. Cramer said he thinks Prologis shares have fallen far enough to start looking tempting.