2 'high quality' ASX 200 shares to navigate a turbulent 2023: expert

Inflation and energy security will once again dominate markets this year, so which are the best stocks to buy?

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Sure, 2022 was pretty rough. But it won't be much easier in 2023 for ASX investors.

That's according to Datt Capital portfolio manager Emanuel Datt, who said that punters will be "muddling through" this year trying to keep their portfolios in the green.

There are just a lot of mines to step around.

"We expect lower than forecast GDP growth for Australia, continuing inflation, high energy prices and moves to increase taxation," he said.

"It's an environment that will test investors."

A businessman on a rowing boat in rough seas.

Image source: Getty Images

Inflation fight is far from over

The Reserve Bank of Australia, which was arguably late in fighting rampant inflation, hasn't inspired much confidence either.

"Investors can expect continuing price inflation going forward, given the inability of the RBA to set the requisite cadence in terms of normalising interest rates to quell inflationary pressures."

Datt added that "unemployment and underemployment rates remain extremely low by historical standards", which would drive up wages.

"Labour cost inflation has the potential to influence other major components of CPI, making the present, higher than usual, inflation environment likely to persist."

Datt predicts that commodity prices will head up, which might be great for ASX-listed resources companies, but will further fuel inflation going into 2024.

The fund manager is also worried about a bigger government.

"We also believe higher taxation and increased government intervention are also on the cards," Datt said.

"As a result, it's likely that independent self-funded retirees who sit outside the government pension system could have their benefits slashed via further changes to dividend imputation and superannuation laws, given the treasurer has recently expressed views on traditional capitalism."

Energy crisis far from over

The energy crisis is set to continue well into 2023, reckons Datt.

"Energy prices are likely to remain escalated as energy commodities remain in short supply relative to 12 months ago," he said.

"Despite the tighter supply side, governments continue to ignore the very real risks that lie ahead in terms of energy security."

According to Datt, governments are enacting rules that are making the energy situation worse. For example, raising royalty rates that discourage new projects, stringent reservation policies, and slow approvals for new mines.

That's why Datt's two top stock picks for 2023 are coal miners Whitehaven Coal Ltd (ASX: WHC) and New Hope Corporation Limited (ASX: NHC).

Those who have held these stocks have done pretty well already. The Whitehaven share price has rocketed 170% upwards over the past 12 months while New Hope is 129.5% higher.

"Both are exposed to high-quality export thermal coal markets and long-life assets, whilst being conservatively valued and heavily cash generative," he said.

"Both are expected to continue to return capital to shareholders via dividends and share buybacks going forward."

The two miners each pay out very tempting dividends. Whitehaven is currently at 6% yield while New Hope is a whopping 8.2%.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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