- Predicting the Future
- 2023 Stock Picks
- Jimmy Mengel: InMode Ltd. (NASDAQ: INMD)
- Adam English: MN8 Energy
- Briton Ryle: Aehr Test Systems (NASDAQ: AEHR)
- The MoneyShow Guide
“Being the soothsayer of the tribe is a dirty job, but someone has to do it.”
― Anthon St. Maarten, The Sensible Psychic
It’s time to play fortune teller here at The Profit Sector. Your humble editors are ready to predict our best stocks for 2023.
Speculating on the future is a fun exercise. What do we have to lose? Money? Dignity? Both?
What is certain is that we analysts get to play Nostradamus for the day and make our predictions on how to invest your hard-earned capital. Your dedicated editors are always digging into hundreds of stocks to decide how to bring to you – our dear reader – the most important information on the most important trends that we can from the tools we have at hand.
What are these tools? Some are supernatural, some are practical, and some are a mix of both. We don’t have crystal balls, but we have the benefit of knowledge that is more readily available now than at any other time in history.
Let’s check into some of the most interesting ways of predicting the future. Since there are dozens, I’ll stick with the basic A, B, and C…
Predicting the Future
Anthropomancy is the divination of the entrails of humans or animals. While this method seems to be a bit extreme, sometimes we humans could use all the help we can get. Who could have predicted the dot-com bust of the early 2000s, the financial crisis of 2008, or the Coronavirus bubble pop of 2020? The bloody innards of animals? Who knows, but humans were certainly late to those parties.
Sure, we could read the viscera of felled beasts or brethren, but that may stain our suits.
Do you grab a goat or examine the float?
You choose an arrow from a quiver at random. Each arrow has a message on it. Whatever that message may be – say, hold cash, buy gold or sell tech, that is what you have to do. It does beg the question of whether the gods controlling this little exercise understand the stock valuation of tech companies like Microsoft, Apple, and Alphabet or are still stuck in the dark ages.
As Margaret Atwood once said, “Every aspect of human technology has a dark side, including the bow and arrow.”
Finally, we’ve arrived at Tarot Cards. Perhaps the most famous fortune-telling trick known to man. It has been said that these cards – called “arcana,” meaning secrets or mysteries – invoke divination and can foretell glory or despair.
The soothsayer lays out the cards in front of you. It could be The Magician, The Hermit, or the most fiendish – the Fool. Whatever card you get portends your future, with a little spin from the card reader as to the particulars of your fate.
As comedian Steven Wright once quipped, “I stayed up all night playing poker with tarot cards. I got a full house, and four people died.”
2023 Stock Picks
As much as I’d like to tell you that your editors dabble in the dark arts of fortune-telling, we go about things in a less celestial manner. We dive into P/E ratios, funds from operations, and macroeconomic trends. Instead of playing with tarot cards, we prefer to light Doji candles. It may not be as whimsical as animals, archers, and arcana, but I trust it is the best method for identifying the best ways to invest your money.
We do our due diligence and research, so you don’t have to sift through the thousands of articles, reports, and financial releases.
I’m excited to share what we believe will be three great investments for the year ahead.
For the last 39 years, MoneyShow has surveyed the nation’s most respected, time-tested market experts and newsletter editors for their favorite investment ideas for the coming 12 months. Those picks run the gamut from conservative, quality blue chips for safe and steady returns to high-growth stocks with massive potential upside.
Let’s close our eyes, light some incense, and get to the prophecies…
Jimmy Mengel: InMode Ltd. (NASDAQ: INMD)
It’s no secret that we humans can be a vain bunch. We want to turn back the hands of time as we age. That’s why elective cosmetic surgery has surged past pre-pandemic levels. Almost 30% of clinics have noted that their business has doubled since 2019.
A major motivation for the rise is the “Zoom Effect.” People — especially women between 31 and 45 — have become incredibly self-conscious about those virtual meetings that have replaced the day-to-day, in-person ones.
The key difference?
You are staring at your own face for hours on end. Yikes — every wrinkle, pimple, and imperfection you’ve ever had is staring you in the face. One objection to plastic surgery is that going under the knife sounds scary, is painful, and carries some dangerous side effects. However, one company seeks to change that with the least invasive procedures available.
Israel-based InMode Ltd. (NASDAQ: INMD) is a leading global provider of innovative medical technologies. Instead of invasive elective surgeries, the company develops, manufactures, and markets platforms that harness novel radio frequency (RF) based technology.
In essence, a doctor will use a wand that is connected to a machine that creates radio waves. They will pass the wand over your body to apply those radio waves to your skin — safely and rather painlessly. These deep “subdermal” radio frequencies do everything from facelifts to eye tightening and remodeling tissue and fat. No knives are required.
InMode has just posted record quarterly revenue and just signed actress, model, and influencer Eva Longoria as its global brand ambassador to grow the company overseas. As the population ages and the cosmetic surgery trend continues, InMode is in a great position for 2023 and beyond.
Adam English: MN8 Energy
The company I’m watching in 2023 can’t even be invested in yet; MN8 Energy (NYSE: MNX) filed for a NYSE listing under the symbol MNX in September 2022 after Goldman Sachs Asset Management created it in 2017.
It seems like ages ago, but the first wave of renewable energy — with its hype, share dilution, bureaucratic delays, and obscene cap-ex costs — is long over. Dare I even mention the specter of SolarCity?
Now, I have nothing against fossil fuels, but the energy sector will be in wealth extraction mode in 2023. Chasing that trend would be “a day late and a dollar short” — or a year late and a whole lot more short.
What do I like about MN8? A big part is that it may offer a relatively clean slate. There shouldn’t be the kind of legacy cost averaging, debt, or subpar returns on investment baked in. Plus, I think these kinds of solar and battery storage projects can move forward if they’re clearly going to be profitable — regardless of fringe politics.
Many have in the last decade, even without subsidies. I think people really don’t care where power comes from, outside of NIMBY issues, as long as it is cheap. I don’t like that we don’t get a peek at MN8’s books yet. I want to see reasonable debt levels, debt rotation, low-interest rates, and the IPO fueling growth potential instead of an underwriter cash-out opportunity.
IPOs really aren’t a place for retail investors, though. A couple of months in, I plan on taking a good hard look at the company with at least a time frame of several years. As long as there are signs it can scale revenue with operating costs, it doesn’t sacrifice P&L ratios, and there are no obvious red flags, I’ll be intrigued.
Briton Ryle: Aehr Test Systems (NASDAQ: AEHR)
As an analyst, writer, and stock picker for the last 25 years, this is my third significant bear market. I’ve seen plenty of investors and colleagues get burned trying to bottom fish or time the lows of a bear market.
It is easy to see a stock that’s down 50% and think, “Oh, that’s a bargain.” Of course, you know what happens next. Don’t worry. I’ve done it, too. And that’s why I want to tell you that there is only one kind of stock that can be successfully bought during a bear market — the stock of a company that is demonstrating breakout earnings. Most companies barely grow during bear markets.
Only a precious few companies can post significant growth during a bear market.
My favorite stock for 2023 is among the precious few. Aehr Test Systems (AEHR) makes test systems that ensure semiconductors work as they should before being shipped out of the factory. It’s a critical and underappreciated aspect of the semiconductor fabrication process. Aehr is particularly interesting because they make test systems for silicon carbide (SiC) chips, which are much different from regular silicon chips.
For one, the failure rate is higher because silicon carbide chips are harder to make. And so, the testing process is more rigorous. And two, because silicon carbide chips can operate at much higher temperatures (up to 200 degrees celsius), they are the go-to chip for the entire electric vehicle (EV) market. Demand for silicon carbide chips is off the charts, expected to grow at a ~150% clip a year for the next five years.
Test equipment for silicon carbide chips is also growing at an explosive rate. This is why, back on October 7, Aehr Systems’ third-quarter earnings report was a barnburner. The company brought in $10.7 million in revenue for the third quarter, 88% better than the prior year. Analysts were expecting $8.5 million in revenue. Earnings per share came in at $0.05 vs. expectations of $0.01.
That is simply a massive, massive beat. And the stock rallied 23% the next day, a day the Dow was pounded lower by over 500 points. In a press release, the CEO said the company had $19.5 million in bookings. Those bookings had come during the just ended third quarter. That’s new business, and Aehr will certainly fill those orders during its next few quarters.
But get this: Despite the massive earnings beat last quarter and that $19.5 million in new orders, the company did not raise its earnings guidance for the full year. That means that more earnings beats are coming over the next few quarters. Aehr shares are going a lot higher. I have a one-year price target of $45.
The MoneyShow Guide
There you have it, three picks from your three favorite market soothsayers. I highly recommend reading MoneyShow’s 2023 prediction guide, featuring 116 ideas for the new year. It’s rare to get a peek at predictions from the entire newsletter universe, with recommendations ranging from fast-growing stocks with the high-risk, high-reward potential to conservative dividend-payers chosen for safe and steady returns.
These picks run the gamut.
You can check out the entire report, free, right here.
The Profit Sector
Follow me on Twitter @mengeled.