It's a phenomenon regularly seen that the worst-performing ASX sectors in one year turn it around to have a belter the next year.
After all, if some ASX shares have been pummelled, the heavy discounting gives it more upside when the market inevitably rotates its love back to them.
With this pivot in mind, Shaw and Partners senior investment advisor Adam Dawes stuck his neck out this week to name two sectors that are set to boom in 2023.
And what's more, he dared to name four stocks in those industries that he would buy now:
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Watch healthcare and technology stocks over the next 12 months
While he still felt "slightly contrarian" making this claim, Dawes felt like now is the time to revisit some unloved industries.
"You've got to start to potentially start dipping your toe back into the consumer discretionary space and certainly the tech space," he told Switzer TV Investing.
Technology completely fell out of favour in 2022 due to rising interest rates that are adverse to high-growth businesses.
And the central banks' attempts to bring down inflation by slamming consumer wallets have put the fear of God into investors about retailers that are not selling staples.
Dawes feels like they've both been punished enough and those sectors could make a roaring comeback in 2023.
"In the new year, once interest rates potentially stabilise — we might even see some interest rates starting to fall — that will give that consumer discretionary space a bit of a boost."
4 best ASX shares to buy in health and tech
Dawes named three ASX shares in discretionary retail and one technology stock to lead the comeback:
- Lovisa Holdings Ltd (ASX: LOV)
- Universal Store Holdings Ltd (ASX: UNI)
- Scentre Group (ASX: SCG)
- Xero Limited (ASX: XRO)
Shares for budget jewellery retailer Lovisa have already bucked the trend, gaining 80% since mid-June. Youth fashion merchant Universal Store has also seen its stock price rocket more than 62% upwards over the same period.
Operator of Westfield shopping malls, Scentre Group, is a good buy for those who are seeking a more generalist play.
"If you want to go broader, something like Scentre Group, because then you get all the stores at once putting in money."
In the tech sector, Xero investors have watched in horror as their shares have lost more than 55% year to date.
The market reacted negatively to the latest update that showed overseas growth was not up to expected levels and that a new chief executive would be starting in the new year.
But for Dawes, this just presents a buying opportunity with a long-term horizon.
"Xero is a classic example of where we really want to be getting some positions in — probably early in the new year versus later on."
