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?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

More on Resources Shares

Female South32 miner smiling with mining machinery in the background.
Resources Shares

South32 shares are rising again – what just happened?

Strong balance sheet and long-term growth keep this mining stock powering on.

Read more »

Miner looking at a tablet.
Resources Shares

Rio Tinto shares soar to an all-time high: Buy, hold or sell?

The miner's share price is climbing higher again today.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

Why are shares in this ASX rare earths company surging today?

There's good news on the capital front.

Read more »

Miner looking at a tablet.
Resources Shares

Ramelius Resources shares: Dalgaranga exploration lifts future mine potential

Ramelius Resources unveils high-grade gold exploration results at Dalgaranga.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Vault Minerals posts strong Q3 gold production and free cash flow jump

Vault Minerals delivered a strong quarter with robust gold output, free cash flow surge, and continued growth investment.

Read more »

A woman stands in a field and raises her arms to welcome a golden sunset.
Resources Shares

Northern Star Resources March quarter 2026: higher-margin gold sales and solid cash flow

Northern Star Resources reported higher-margin gold sales, strong cash flow, and confirmed its growth and investment plans for FY26.

Read more »

A female miner wearing a high vis vest and hard hard smiles and holds a clipboard while inspecting a mine site with a colleague.
Resources Shares

Iluka Resources quarterly earnings: revenue, production, and project updates

Iluka Resources Q1 2026 saw lower revenue and production, but major minerals and rare earths projects continue to progress.

Read more »

A miner stands in front of an excavator at a mine site.
Resources Shares

Paladin Energy boosts uranium production and lifts FY26 guidance

Paladin Energy increased uranium production, upgraded its guidance, and achieved a major milestone in Canada’s PLS Project during the March…

Read more »