Thanks to an end of year rally, both BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) shares are on track to beat the market with solid gains in 2022.
But with a new year rapidly approaching, investors may be wondering which is the better option for a portfolio in 2023.
Should you buy BHP or Fortescue shares for 2023?
Interestingly, the broker community isn't overly positive on either mining giant going into 2023. However, BHP is certainly the lesser of two evils based on current recommendations.
While most brokers have neutral ratings on BHP, almost all major brokers have the equivalent of sell ratings on Fortescue shares.
In fact, Goldman Sachs, Morgan Stanley, and Morgans are all predicting that the Fortescue share price could tumble approximately 30% over the next 12 months.
And although Macquarie isn't quite as bearish on Fortescue, its underperform rating and $17.00 price target still implies potential downside of 18% between now and this time next year.
Speaking of Macquarie, its analysts are one of the only brokers to still see value in the BHP share price at the current level. With an outperform rating and $50.00 price target, this implies potential upside of 8% over the next 12 months.
Alternatives
Investors may be better off looking outside these two miners at BHP spin-off South32 Ltd (ASX: S32).
Brokers are overwhelmingly bullish on the diversified miner, with a number predicting double digit share price gains in 2023.
One of the most bullish brokers is Morgans, which has an add rating and $5.30 price target on its shares. This implies potential upside of 30% for investors from current levels.
It commented:
Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength). We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.
