The Magnificent Seven stocks garnered much of the headlines in 2023 — and for good reason as large-cap techs like Meta Platforms and Nvidia helped fuel a 40%-plus gain for the Nasdaq composite and came out among the 100 best stocks of 2023.
The year got off to a good start when the Nasdaq composite marked a follow-through day on Jan. 6, rising 2.6% in higher volume. From there, the index rallied 16% to a high of 12,269 in early February, an uptrend that sparked some of the year's earliest winners.
Nvidia started its meteoric rise a few weeks after the follow-through day. The stock soared out of a cup base during the week of Jan. 27. Nvidia continued to rally into its February earnings report, which showed the third straight earnings decline and second straight revenue decline. But data-center revenue, which includes Nvidia's artificial intelligence chips, rose 11% to $3.62 billion.
At the time, CEO Jensen Huang said AI was at an "inflection point" and that demand was strengthening for Nvidia's chips to develop machine learning software. The April-quarter results marked another milestone for Nvidia, when the stock gapped up 24% on the company's bullish outlook for AI and data center chips.
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Meta's Run To Best Companies Of 2023
Meta Platforms soared in early February. Similar to Nvidia, the company's earnings report showed earnings and revenue down from year-ago levels. But Meta soared more than 20% on Feb. 2 after revenue beat expectations and the company saw a rebound emerge.
The company also authorized a $40 billion increase to its stock repurchase plan after buying back $27.9 billion worth of shares in 2022. Fast forward to today, and the stock continues to show relative strength, helped by two straight quarters of accelerating earnings and three quarters in a row of accelerating revenue growth.
Although not major players in AI, Tesla was another Magnificent Seven stock to make the 100 best companies. Despite price cuts and other challenges, Tesla about doubled in share price in 2022. Most of its gains came in January and May-July.
Best Stocks Of 2023 Include Consumer Plays
The year's 100 best companies included others exploiting the AI and data center boom, including Super Micro Computer and Vertiv.
Super Micro is another company benefiting from the booming data-center market. The company is known for its high-performance servers, but it also provides server management software and storage systems to enterprise data centers. SMCI started its move in February when it jumped out of an 11-week consolidation. The stock nearly quadrupled from a 92.80 buy point before settling into its latest consolidation.
Vertiv, a provider of infrastructure services to data centers, soared out of a cup base May 25 and nearly tripled from a 17.88 entry. VRT continues to hold near highs, helped by compelling fundamentals. The stock gapped up powerfully Aug. 2 after the company reported a 360% surge in quarterly profit. Revenue increased 24% to $1.73 billion.
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Commenting on the results, CEO Giordano Albertazzi said: "I am encouraged by the growth acceleration potential, which has just begun in our industry, represented by data center infrastructure necessary to meet the rapidly growing demand for compute capacity driven by artificial intelligence."
Best Stocks Of 2023: Consumer, Housing Leaders
U.S. consumers were resilient despite rising prices and borrowing rates, which helps explain the many consumer and housing stocks among the best companies of 2023, including some in the top 20.
Duolingo, which operates a popular mobile language learning platform, continues to churn out strong growth. Duolingo gave an unequivocal buy signal March 1, when it soared out of lengthy consolidation with a handle buy point of 105.46. A bullish Q1 earnings report was the catalyst, which showed paid subscribers up 67% to 4.2 million. Total revenue increased 42% to $103.8 million.
The stock soared again on Nov. 9 after the company reported its fourth straight quarter of 40%+ revenue growth. Paid subscribers totaled 5.8 million, up 60%. Daily active users jumped 63% to 24.2 million.
Low-cost cosmetics provider ELF Beauty soared to new highs the week of Feb. 3 after the company reported a 100% surge in quarterly profit. Revenue jumped 49% to $146.5 million. Since then, ELF has delivered three straight quarters of 70%-plus revenue growth.
Apparel chain Abercrombie & Fitch was one of the five best stocks of 2023, up roughly 275% as the company turned itself around.
In housing, M/I Homes, Builders FirstSource, Beazer Homes, PulteGroup and others defied rising mortgage rates.
Software Among Best Stocks Of 2023
It was a good year for the IBD software sector, which climbed more than 45%. Roughly 20 of the 100 best companies are from that sector.
IBD's enterprise software group, up 26% since the start of November, is home to plenty of the best companies of 2023, including Shopify. Shopify, which helps customers set up small businesses using its e-commerce platform, started its run in late January when it cleared a cup base with a 45.06 entry.
But biotechs, which most years account for a fair share of the best companies, were curiously sparse in the 100 best stocks of 2023.
Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.
