Bank of America took a deep dive into the hardlines sector on Wednesday to find three stocks to buy for 2023 and three to avoid. Overall themes to watch for the sector are that growth will be hard to find, the advantages for non-discretionary retailers and that square footage growers may be attractive.
The firm highlighted Buy-rated Driven Brands (DRVN), Five Below (NASDAQ:FIVE) and Tractor Supply (TSCO) TSCO as top picks for the year.
“Within our coverage universe, these are the companies with the best combination of company-specific growth initiatives, a relatively favorable macro backdrop, and attractive valuation.”
On the flip side, BofA warned on AutoZone (AZO), Best Buy (BBY), and Whirlpool (WHR) into the new year.
“We believe select hardline retail stocks are positioned to underperform in 2023, including AZO, BBY—which we downgrade to Underperform from Neutral—and WHR. All have an unfavorable combination of demand headwinds, margin risk, and potential compression in valuation multiples.”
Compare growth, profitability, and valuation metrics on DRVN, FIVE, TSCO, AZO, BBY, and WHR.
Read More: Five Below stock, Tractor Supply stock make BofA’s top 2023 picks list