The U.S. equity team at Mizuho Securities names its top stocks for a landscape of higher rates, rising inflation and a slowing economy.

“The broad-based sell-off in equity markets provides undoubted opportunity, but has to be viewed against the timing of inflection points in rates, inflation and growth,” the team said. “Mizuho analysts are advocating for recession resistant portfolios that can also act as an inflation hedge and a focus on quality stocks.”

The picks by subsector are:

• Consumer (XLP) Food & Healthy Living (also “most cautious” on Hain Celestial (HAIN) and Beyond Meat (BYND))

1. Kraft-Heinz (KHC), price target $50
2. Mondelez (MDLZ), $78
3. Simply Good Foods (SMPL), $45
4. BellRing Brands (BRBR), $38

• Energy (XLE) MLPs & Gas Utilities – “We continue to believe integrated Midstream names that can touch different hydrocarbon molecules across the value chain can benefit from higher volumes more than less-integrated peers.”

1. Energy Transfer (ET), $17
2. Cheniere Energy (LNG), $195
3. Plains All American (PAA), $15
4. Targa Resources (TRGP), $92
5. Western Midstream (WES), $33

• Energy (XLE) Oil & Gas – “Despite commodity price headwinds and ~100% outperformance vs. the S&P 500 (SP500) (SPY) since Jan 2021, we believe the sector still offers discounted value compared to the market and potential for strong FCF generation that stands out.”

1. Diamondback Energy (FANG), $195
2. Coterra Energy (CTRA), $40
3. ExxonMobil (XOM), $140

• Utilities (XLU) – “Stock picking will take prominence for outperformance, and our key theme is earnings resiliency.”

1. DTE Energy (DTE), $131
2. CMS Energy (CMS), $69
3. Xcel Energy (XEL), $75
4. Centerpoint Energy (CNP), $32

• Healthcare (XLV) Biotechnology (XBI) – “Biotech has never seen three consecutive negative years of returns; we believe history will prevail in 2023.”

1. Arcus Biosciences (RCUS), $51
2. Autolus Therapeutics (AUTL), $18
3. Iovance Biotherapeutics (IOVA), $30
4. Merck (MRK), $130
5. Biogen (BIIB), $325
6. Cytokinetics (CYTK), $80
7. Alkermes (ALKS), $36
8. Arcutis Biotherapeutics (ARQT), $61
9. BioXcel Therapeutics (BTAI), $24
10. Karuna Therapeutics (KRTX), $270

• Healthcare (XLV) Healthcare Services

1. Quest Diagnostics (DGX), $165
2. Encompass Health (EHC), $65
3. Elevance Health (ELV), $575
4. HCA Healthcare (HCA), $265
5. IQVIA (IQV), $250
6. Universal Health Servies (UHS), $144

• Healthcare (XLV) Medtech & Diagnostics

1. Alcon (ALC), $85
2. Cooper (COO), $385
3. Medtronic (MDT), $95
4. Haemonetics (HAE), $110
5. Lantheus (LNTH), $105
6. ADMA Biologics (ADMA), $6
7. Establishment Labs (ESTA), $95

• Chemicals, Agriculture & Packaging – “Heading into ’23 we remain cautious on the macro and believe risks to ’23 EPS pose interim downside to equities, which should ultimately weigh on investors’ recent optimism on bullish narratives (China re-opening process, IRA optionality, US industrial “holding in”, global auto SAAR rebound, etc.).”

1. Corteva (CTVA), $78
2. Ashland (ASH), $141
3. FMC (FMC), $146
4. Entegris (ENTG), $105

• Industrials (XLI) Industrial Technology – “We remain positive on near-term fundamentals with 4Q earnings largely in line despite macro warning signals continuing to flare.”

1. Johnson Controls (JCI), $78
2. Carrier Global (CARR), $53
3. Pentair (PNR), $60

• REITs (XLRE) – “We recommend investors remain Equal-weight REITs in 2023 with headwinds from: still-tricky macro with high, but slowly moderating inflation; fundamental deceleration, higher interest costs, and limited external growth driving a slowdown in earnings; and incremental concerns about recession/the consumer/tenant credit.”

1. Alexandria Real Estate (ARE), $178
2. Brixmor Property Group (BRX), $24
3. Boston Properties (BXP), $85
4. Camden Property Trust (CPT), $131
5. Welltower (WELL), $91

• Technology (XLK) FinTech (cautious on Upstart (UPST), Coinbase (COIN), Square (SQ))

1. Toast (TOST), $24
2. Fiserv (FISV), $135
3. Fidelity National Information Services (FIS), $90
4. Robinhood (HOOD), $14

• Technology (XLK) U.S. & China Internet – “In the US, we anticipate high inflation and rising interest rates likely lead to a deceleration in GDP growth, and consumers are increasingly strapped with low savings and increased leverage. In China, reopening of the economy and a more accommodative monetary policy should lead to higher GDP growth with ample capacity to drive consumption.”

1. Meta Platforms (META), $170
2. Uber (UBER), $46
3. JD.com (JD), $82
4. Trip.com (TCOM), $45
5. Baidu (BIDU), $180

• Technology (XLK) Semicondustors (SOXX) (SMH) & Auto Tech – “In 2023, we see improving sentiment and strength in WFE, Gaming/DC, and Handsets, and challenges with Memory and Analog.”

1. Nvidia (NVDA), $200
2. Lam Research (LRCX), $500
3. Applied Materials (AMAT), $132
4. AMD (AMD), $95
5. Qualcomm (QCOM), $150
6. Broadcom (AVGO), $700
7. Credi Semi (CRDO), $20
8. Mobileye (MBLY), $40
9. Rivian Automotive (RIVN), $50

• Technology (XLK) – Software – “We believe the most important trends benefiting software vendors today and in the future are Digital Transformation, Work from Anywhere, Data and Analytics, DevOps, Next-Gen Security, Customer Data Platforms (CDPs), Payroll Modernization, and Industrial Software.”

1. Atlassian (TEAM), $255
2. CrowdStrike (CRWD), $175
3. Palo Alto Networks (PANW), $220
4. Intuit (INTU), $650
5. Ceridian (CDAY), $80
6. Workday (RIVN), $200
7. Procore Technologies (PCOR), $74
8. PTC (PTC), $155

• See the worst-performing ETF of 2023.