Following October's favorable inflation data, the odds of an eventual slowdown in the pace of federal rate hikes have increased ahead of 2023. According to the November Fed meeting minutes, most officials opined that smaller rate hikes "would likely soon be appropriate."
The CME FedWatch tool expects a more than 80% probability that the Federal Reserve will go for a 50-bps hike in December. This comes after four consecutive 75 basis point rate hikes. Cleveland Fed President Loretta Mester said, "I think we can slow down from the 75 at the next meeting. I don't have a problem with that, I do think that's very appropriate."
Such optimistic forecasts are expected to bode well for the broader markets. According to Fundstrat's head of research Tom Lee, the stock market could soar in a 1982-style vertical rally and touch new records if inflation continues to slow.
Therefore, investors might consider adding quality stocks General Motors Company (GM) and APA Corporation (APA) to their watchlist as we head into 2023.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, automobile parts, and accessories in North America, the Asia Pacific, the Middle East, Africa, South America, the United States, and China. Its segments are GM North America; GM International; Cruise; and GM Financial.
On November 17, 2022, GM and Vale Canada Limited, a subsidiary of Vale S.A. (VALE), signed an agreement for the long-term supply of battery-grade nickel sulfate to enhance North American electric vehicle (EV) supply chains. Amid growing EV demand, this move is expected to generate solid profitability for both companies.
Also, on November 16, 2022, GM and Nel Hydrogen US, a subsidiary of Nel ASA, entered into a joint development agreement. This agreement will merge GM's fuel cell expertise and NEL's deep knowledge of electrolyzers, forming cost-efficient renewable hydrogen sources.
GM's revenue came in at $41.89 billion for the third quarter that ended September 30, 2022, up 56.4% year-over-year. Moreover, its adjusted net earnings came in at $3.28 billion, up 47.5% year-over-year, while its adjusted EPS came in at $2.25, up 48% year-over-year.
GM's revenue is expected to increase 21.4% year-over-year to $154.22 billion in 2022. Its EPS is expected to increase marginally year-over-year to $7.19 in 2022. It surpassed EPS estimates in three of four trailing quarters. Over the past month, the stock has gained 14.2% to close the last trading session at $40.11.
GM's POWR Ratings reflect its promising outlook. It has an overall B rating representing a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GM has an A grade for Growth and a B for Value and Sentiment. It is ranked #20 out of 61 stocks in the Auto & Vehicle Manufacturers industry. Click here to see the additional POWR Ratings for GM (Momentum, Stability, Quality).
APA Corporation (APA)
APA and its subsidiaries explore for, develop, and produce oil and gas properties. It has exploration and production in the United States, Egypt, and the United Kingdom and exploration and appraisal operations in offshore Suriname.
On November 9, 2022, APA announced a multi-year partnership with the Clean Cooking Alliance (CCA). Under the partnership, APA and CCA aim to achieve universal access to clean cooking by 2030, marking a milestone in sustainable development.
John J. Christmann IV, APA's CEO, and the president said, "This partnership and program align with our social investment strategy and underscore our commitment to expanding access to energy for communities suffering from energy poverty."
APA's total revenues came in at $2.87 billion for the third quarter that ended September 30, 2022, up 74% year-over-year. Its net income came in at $422 million, compared to a loss of $113 million in the previous period. Also, its EPS came in at $1.28, compared to a loss per share of $0.30 in the prior-year period.
Street expects APA's revenue to increase 26% year-over-year to $9.99 billion in 2022. Its EPS is expected to increase 120.3% year-over-year to $8.59 in 2022. The stock has gained 77.7% year-to-date to close the last trading session at $46.78.
APA's overall B rating equates to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum and Quality and a B for Sentiment.
APA is ranked #9 out of 93 stocks in the B-rated Energy – Oil & Gas industry. Click here to see APA's ratings for Growth, Value, and Stability.
GM shares were unchanged in premarket trading Thursday. Year-to-date, GM has declined -31.43%, versus a -14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
2 Stocks to Keep Your Eye on Heading Into 2023 StockNews.com
