How I’d invest $20k in ASX 200 shares in 2023 to capitalise on the stock market rally

S&P/ASX 200 Index (ASX: XJO) shares have gone through a lot this year. Volatility has picked up, and plenty of ASX 200 shares are trading at lower prices than they were at the start of the year. But this could be a good time to buy ASX shares, in my opinion.

I believe it makes sense to buy assets at a cheaper price. And I think some ASX shares that have dropped in price heavily could be on track for a rebound.

However, it’s important not to anchor to past share prices. Just because something was previously at a share price of $30 doesn’t mean it will get back there any time soon.

Looking specifically at ASX 200 shares that have been sold down but could rebound nicely in the medium term, I like the look of these:

Pinnacle Investment Management Group Ltd (ASX: PNI)

I’d invest $10,000 into Pinnacle shares. If the (ASX 200) share market does indeed rally in 2023, then I think this financial services company is well-placed to benefit. It’s invested in a number of fund managers, so a rise in share prices would be a natural boost to underlying funds under management (FUM) and profitability, and presumably the Pinnacle share price.

I think the business can continue to attract more high-quality fund managers to its stable by offering its services, with areas like legal, compliance, distribution capabilities and seed capital. I’m excited by its potential to grow with overseas managers.

The Pinnacle share price has dropped 40% in 2022, and it’s priced at 18x FY24’s estimated earnings, according to estimates on CMC Markets. I think this price is reasonable, considering the earnings growth rate in the long term could rebound nicely once asset prices aren’t declining.

Breville Group Ltd (ASX: BRG)

I’d invest $4,000 into Breville shares.

The kitchen appliance maker was one of the beneficiaries during COVID-19 as more people spent time at home. But now, investor sentiment has gone into reverse. The Breville share price has dropped by 37% in 2022 to date.

But, even if demand reduces in 2023, I think the company has long-term potential as it enters new markets, launches new products and makes the occasional acquisition.

I think this ASX 200 share is one of Australia’s global success stories. A return to normal supply chain conditions and improving logistics costs can help Breville’s profit margins.

At this lower price, I think it now represents compelling long-term value. According to CMC Markets, it’s valued at 22x FY24’s estimated earnings.

Goodman Group (ASX: GMG)

I’d invest $6,000 into Goodman shares.

I think that Goodman is one of the best property businesses on the ASX. It owns, develops and manages industrial property estates. In addition, the company indirectly benefits the strong demand for logistics and warehouse real estate.

The Goodman share price has sunk more than 30% in 2022, so I think the value looks much more reasonable now.

In Goodman’s FY23 first quarter update, it said that its portfolio occupancy was 99% with a 12-month rolling like-for-like net income growth of 4%. Plus, it had $13.8 billion of development work in progress across 85 projects, which suggests a lot of future rental income in the works.

The ASX 200 share is still expecting operating earnings per security (EPS) to grow by 11% in FY23, which would be a solid increase, in my opinion.

I think that ongoing demand for well-located properties that can improve productivity for customers can lead to good rental growth.

The post How I’d invest $20k in ASX 200 shares in 2023 to capitalise on the stock market rally appeared first on The Motley Fool Australia.

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More reading

• Buy this cheap ASX 200 share with ‘the best property balance sheet on the market’: fundie
• Growth is back: 3 ASX shares to buy now for a 2023 re-rate
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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