2023 was a year of caution as bank and real estate stocks underperformed owing to rising credit risk. While oil stocks maintained their cyclical high as the Israel-Hamas war broke, renewable energy stocks slumped as balance sheet debt became difficult to manage. Amid the rising debt burden and lowering consumer demand, tech stocks made a comeback this year after bottoming out in October 2022.
The economy held off in 2023 as inflation slowed without triggering a full-blown recession. However, Canadians felt the impact of the recession, with grocery bills touching the roof.
As we head to a new year, it is time to review 2023 and learn from the mistakes we made.
Best-performing TSX stocks of 2023
Tech stocks took a hit from the 2022 bubble burst. Shopify (TSX:SHOP) stock was among the biggest losers as it lost 78% value. The business also saw a huge wave of pandemic-struck shops opening online stores in 2021 and closing them down in 2023. The company also closed its warehousing business to stay asset-light. Once past the growth and slump, the e-commerce giant returned to sustainable growth in 2023. The stock surged 119% this year but is still 53% below its 2021 peak.
The biggest jump of 60% came in November, as holiday season sales picked up. Shopify witnessed its best Black Friday sales, as consumers now divided their shopping between physical and online stores. The stock is trading above $100 and closer to oversold as seasonal buying keeps the price bullish. Now is not a good time to buy the stock but sell it. As seasonality fades, the stock could see a correction between February and April when shopping is slow.
Constellation Software
Constellation Software (TSX:CSU) was another big winner of 2023 as the share price surged 54%. While there are many other stocks that surged 80-100%, Constellation was the top performer on my watchlist because of its sustained growth momentum. It was among the few tech stocks that surged past its 2021 peak and made a new high.
Its model of compounding its cash flows by acquiring niche vertical-specific software companies with stable cash flows continues to show results even during the tech bubble burst and the pandemic dip. The stock broke the $3,000 mark in less than 18 months after hitting the $2,000 mark, hinting that the stock is growing fast. This is a buy-and-hold stock, even at the current price of over $3,250, as it won’t take long to reach $4,000. That’s how compounding works. It is the first 100% that takes time. The money doubles at a faster pace.
Worst-performing TSX stocks of 2023
While tech stocks had a gala time, energy and real estate stocks suffered. By definition, a real estate investment trust (REIT) is a trust that distributes its income among shareholders. However, True North Commercial REIT (TSX:TNT.UN) had a tough time as its occupancy fell while its mortgage payments kept rising. With income falling and expenses rising, it has no option but to halve its payouts. It still struggled to make distribution payments. Hence, it sold some properties to buy back shares and consolidated its units in a 5.75:1 ratio.
The REIT even reallocated the units under the revised intrinsic value so that they could reflect the true value of the business. Under the reallocation, it reduced the net asset value to $4.97 as of September 30, 2023, from $5.69 as of December 31, 2022.
That explains why the stock lost 70% of its value in 2023. With the worst hopefully over, easing of interest rate could lower its mortgage payments and bring back occupancy. The stock is a distressed buy. If the REIT succeeds in reviving its business, the stock could double or triple your money in a year or two.
Pipeline stocks
TC Energy and Enbridge shares performed poorly until October 2023, falling 22% from their 52-week highs. They corrected from their 2022 highs, triggered by rising oil and gas prices. The 2023 dip was an opportunity for dividend seekers to lock in higher dividend yields. They are a buy even now before they reach seasonal highs of $70 and $55.
