- Tech and real estate have been among the S&P 500's worst sectors in 2022.
- Cramer said he believes tech and real estate will continue to struggle next year; however, tech may start to see its fortunes improve after the first half of 2023.
CNBC's Jim Cramer on Wednesday highlighted technology and real estate stocks he believes can perform well in 2023, following a dismal year for both sectors.
Rising interest rates presented challenges for tech and real estate industries in 2022. Information technology is down 27% year to date, as of Wednesday's close, while real estate has fallen 28.4% over the same stretch. The only S&P 500 sectors to perform worse are consumer discretionary, down 36.2%, and communication services, down 40.3%.
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Cramer said he believes tech and real estate will continue to struggle next year; however, tech may start to see its fortunes improve after the first half of 2023.
Tech picks for 2023
Oracle's fiscal 2023 second-quarter earnings last week were "magnificent," Cramer said. The stock sells 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 its pending deal to acquire VMware. Broadcom shares also carry a dividend yield around 3.3%, allowing investors to be patient while that acquisition goes through regulatory review, he said. The company also recently announced a $10 billion stock buyback program.
Palo Alto Networks is not in the S&P 500. Nonetheless, Cramer said he believes it's 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 the stock isn't too far away from its 52-week closing low of $142.21 on Nov. 4. "I recommend picking some up now right here and maybe some more into weakness," he said.
Real estate picks for 2023
Cramer said he likes Realty Income because its 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's a dividend machine; they pay a monthly dividend," he said, "and tend to raise it multiple times a year. Currently, the stock yields 4.6%."
While shares of Federal Realty have fallen around 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 wealthy suburbs. That is notable given concerns around a potential recession.
Cramer said the logistics focused real estate investment trust, or REIT, has continued to turn in strong results even as its stock has fallen around 31% year to date. Cramer said he thinks Prologis shares have tumbled far enough to start looking enticing.
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