Stock picking requires immense skill and the best information available. This guide to the best companies to invest in for 2023 aims to arm you with data and shortlists to begin your research. We’ll screen the best companies from multiple perspectives to help you generate investment ideas and filter down a list of what to invest in now.
This article is not financial advice. Please perform your own research and consider finding a financial adviser if you need assistance making investment decisions.
Best performing companies in 2022
The following companies have posted share price gains of over 300% in the latest 12 month period. This means that if you had invested £1,000 in a company below, it would now be worth at least £4,000, give or take foreign currency movements. Past performance is not a reliable indicator of future share price movements.
- Moderna, Inc.
- Norsk Hydro ASA
- Reach plc
- Tremor International Ltd
- BioNTech SE
- Kin and Carta plc
- Argo Blockchain plc
- Hapag-Lloyd Aktiengesellschaft
- S&U plc
- Sareum Holdings plc
Let’s look at each of these fast-moving businesses in turn:
Moderna – This modest pharma company earned worldwide recognition with its Covid-19 vaccine, now known as Spikevax. The vaccine was approved for use in the US, UK and the EU. Its rise from relative obscurity has driven its share price through the roof. Spikevax is its only commercially available product, although the company is also developing other Messenger RNA-based vaccines for influenza and other viruses.
Norsk Hydro ASA – A Norwegian industrial company that supplies aluminium products and other mineral-based services. This acquisitive group recently bought control of Aluminium extrusion company SAPA, which had locations based in Europe including the UK.
As an aluminium producer, Norsk Hydro’s financial performance is closely linked to the aluminium commodity price, which has more than doubled since the commodity slum during 2020. Its share price now approaches the 2017 highs, with the 12-month gains having offset a gradual slump over the preceding 3 years.
Reach plc – A sprawling online and print news media group that owns several national newspapers including the Daily Express, the Sun and the Daily Record. The business is successfully navigating the transition from print to digital. A recent tweak to its advertising formats yielded a 65% additional revenue from those ads units.
Tremor International Ltd – A mobile advertising company which is based in Israel but listed recently on the London Stock Exchange. Tremor owns an end-to-end mobile ad platform called Taptica and recently posted record results.
BioNTech SE – An innovative medical treatment company providing personalised therapies for cancer and infections. It has produced exceptional returns for investors during the pandemic due to the global rollout of the Pfizer-BioNTech vaccine which was developed jointly with BioNTech.
Kin and Carta plc – An IT consultancy with grand ambitions and a soaring share price to match. Its shareholder return is driven by an increasingly positive outlook for the business rather than the financial performance for the 2020 year.
Argo Blockchain plc – A cryptocurrency mining service provider. Specialising in low-carbon, efficient data centres, Argo provides the IT infrastructure and technical know-how as a service to miners to effectively rent its computing power to mine cryptocurrencies such as Bitcoin Gold, Ethereum, Ethereum Classic and Zcash. Argo’s fortunes are tied to the crypto markets it serves. In 2020 and 2021 this has worked to its favour; leading to a staggering shareholder performance which reflects the resurgence in many cryptocurrency prices in the last 18 months.
Hapag-Lloyd Aktiengesellschaft – A container shipping business that covers the globe. Container shipping prices have spiked during the pandemic, to Hapag’s absolute advantage. Harpag-Lloyd reported that profits had more than doubled in 2020 compared to the year prior. The share price has responded accordingly. Supplier chains remain at capacity and international logistics businesses are finally enjoying a period of comfortable profitability.
S&U plc – A long-established provider of consumer credit in the UK. S&U plc floated in 1961 and currently specialises in non-prime loans for used car purchases, and bridging loans for property development. This narrow focus appears to be paying off, as S&U plc reported a £35m profit in 2020.
Sareum Holdings plc – A specialist drug development company delivering targeted small molecule therapeutics to improve the treatment of cancer and autoimmune diseases. Sareum is not currently profitable and is spending on R&D to develop treatments that are at an early stage. Sareum concluded a £1 million fundraising via subscriptions for new shares as recently as 21 August 2021. Current shareholders are taking a calculated risk that Sareum’s pipeline will convert into multiple revenue streams.
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What do the best companies to invest in now have in common?
Having reviewed this shortlist of the best companies to invest in (on the basis of past performance), we can draw out some common themes:
- Pandemic performance
- Positive future outlook
A subset of this group have often been on the supply side of the products demanded during the pandemic. Moderna and BioNTech manufacture the Covid-19 vaccines, and Hapag-Lloyd and Norsk Hydro are finding that demand (and the market price) of their industrial products and services have reached a new height as economies have restarted.
Argo is riding the wave of investments into cryptocurrency, which appears to be following its own investment cycle.
Reach, Tremor and Kin & Carta are benefiting from the seismic changes in business and consumer behaviour. The move to digital was accelerated during the pandemic, and businesses who can help the rest of us adapt, or serve adverts to the larger (and more captive) audiences are well placed to deliver strong financial results.
Again, the past is not a reliable indicator of future returns. The best companies to invest in aren’t necessarily the ones seen to be riding a current trend. The best company to buy inside your ISA is actually the companies who are about to ride the next trend. However, if you can run a financial model which outputs this answer with accuracy then why are you still reading this article? You should start a hedge fund and begin soliciting funds from prospective clients today!
Should you invest in the best-performing companies of 2022 for high returns in 2023?
Investing at the peak
The company which posted the largest recent gain in the stock market is not necessarily a ‘no-brainer’ as an investment. The performance of companies, sectors and the broader financial markets tends to ebb and flow to the beat of the financial cycle. Experts suggest that financial cycles last between 7 – 10 years, whereas sector booms can be shorter, and the golden age of an individual company could last as little as a year.
In fact, high performing sectors and asset classes tend to underperform in the short term. This is a form of reversion to the mean.
An investing strategy which is known as ‘Dogs of the FTSE’ attempts to capitalise on the reverse scenario. It encourages investors to pick some of the worst performers on the index, with the hope that their share prices will recover in the following year. The theory goes that the market tends to overreact to news, and therefore the brave investors willing to put money into the most ‘unpopular’ shares could earn a premium return by investing at a bargain.
If Dogs of the FTSE is a successful strategy, the implication for investors chasing the highest performers is bleak. If markets overreact, then companies soaring may be facing a sharp dose of reality in the coming months.
It may interest you to hear that the Dogs of the FTSE strategy has inconclusive results, giving investors neither a firm validation or rejection of the ‘overreaction’ theory, as applied to the UK stock market.
You’ll have to make up your own mind as to whether chasing high performance is smart or folly.
Bias towards high-risk strategies
Lists of top-performing companies over a short period are likely to be packed with companies that have some of the following characteristics:
- High leverage
- ‘Eggs in one basket’ business strategy
- High levels of sensitivity to external factors
- High volatility of share price
These high-risk companies tend to produce extreme performance (in both directions), and therefore when on a good run, they will naturally appear close to the top of share movement league tables.
It’s easy to visualise this problem by asking the question: “What would need to happen for Tesco plc to triple in value?”
Tesco plc is a mega grocery retailer with a dominant market position in the UK. It is difficult to even conceive of how it could triple its revenues or profits within the confines of the markets it inhabits. Therefore it is extremely unlikely to ever grace the top of the ‘mover and shaker’ rankings.
Compare this to the plight of a small video game developer with no current releases and two games in its pipeline. If one or both of its titles achieved anticipated commercial success, the profits of that company could vastly outstrip all prior expectations and this would likely send the value of its shares up by an order of magnitude.
Ignorance of passive approaches
An investing approach that sees an investor attempt to ‘beat the market’ by picking companies based on fundamental or technical factors are following an active investment approach.
This is the antithesis of the passive investment approach. A passive investment strategy will never produce a portfolio that will produce top-of-the-market returns.
That’s because as a passive investor, you are choosing companies that represent the whole of the market, in order to efficiently generate the market return. Of you could buy into index-tracking funds which follow a similar objective.
By keeping their operations simple, passive funds can charge much lower fees to investors, which over the long run should produce superior returns to a higher-risk fund that flip-flops between over and underperformance, while charging investors a premium regardless.
Passive funds charge between 1% – 1.5% less than the best funds to invest in listed above, which means the top active equity funds need to beat the market by this margin each year merely to keep pace with a passive approach. The data shows that few if any professional fund managers have been able to do so over long periods.
The companies invested in by ISA millionaires
AJ Bell, Interactive Investor and Hargreaves Lansdown have all published insights into what their most successful stocks & shares ISA clients have invested in.
They have all noted that direct holding of company shares is a very popular investment choice within this group. This demonstrates that those investors who are canny enough to generate the awesome returns needed to hit a seven-figure ISA account value are confident enough to pick stocks and hold them for the long term.
These companies are some of the most common choices of the ISA millionaires (in no particular order):
- Lloyds Banking Group
- Royal Dutch Shell
- Legal & General
It’s also worth noting that the companies above tend to pay a higher average dividend yield than the FTSE 100 overall. If you’d like to invest for income then read our dividend growth investing guide.
Besides this finding, the main conclusion we can draw is that this list reads like a simple list of the largest companies on the FTSE 100.
This reveals an unpopular truth about investing which is that investing success is often as much about getting your money into the stock market early and waiting for as long as possible, then it is about picking the perfect companies and waiting for the right time to enter the market.
Sourcing private investment opportunities
Of course, the public markets aren’t the only selection of companies to invest available. Other fast-moving businesses include those in the tech and marketing industries.
For example, take Ignite SEO, an SEO agency based in the UK which serves businesses. Investing in a small marketing company such as Ignite would provide investors with exposure to a fast-growing private company in the digital space. As the business isn’t listed on a public stock exchange, keen investors would need to explore the venture capital or seed-funding equity investment routes.
Alternatively, you could approach an online marketing company as a potential angel investor if you believe you have the credibility and pitch which could land you a meeting and potential investment with a marketing company.
Best companies to invest in: conclusion
I hope this article has helped to give your investment research some inspiration or focus. The best companies to invest in now is a very subjective list and there is no right or wrong answer.
Only with hindsight can we ever prove or disprove a projection into the future. This article is not financial advice and we do not claim or offer any guarantees that the best companies we’ve listed above will outperform in the future, as past performance is not a guarantee of future returns.
The best companies to invest in now might be ‘every single company’ in the sense that financial advisers and financial planning books have consistently recommended that investors create a diversified portfolio that gives them exposure to the whole of the stock market.
If you’re interested in exploring fund ideas, then visit our article about the best funds to invest in now.