My 3 top-performing ASX shares of 2022, and why I’m still buying 2 of them for 2023

A new year gives me the opportunity to review how things went in 2022. Some of my ASX shares managed gains, while others suffered double-digit losses. I’ll be happy to buy more of two of them.

It was a very rough year for some sectors of the ASX share market. Inflation and the subsequent interest rate rises have sent some investors running for the exits, with a number of ASX tech shares and ASX retail shares down more than 50% over the past year, such as the Temple & Webster Group Ltd (ASX: TPW) share price.

While I’m not expecting most of 2023 to be like 2022, there could be more volatility ahead. Who knows what’s going to happen next? That’s part of the fun of investing.

Fortescue Metals Group Limited (ASX: FMG)

My best-performing ASX share was the ASX iron ore share, Fortescue. It rose by around 7% in 2022.

I think it must be pointed out that the timing of the start and end of the 12-month return has played a part here. If the 12-month comparison were done on 13 January, the Fortescue share price would have shown a decline, though if the 12-month return were calculated in it mid-December it would show an even better return than 7%.

Just over a year ago, the iron ore price had slumped to below US$100 per tonne, amid fears about the Chinese real estate sector, including Evergrande. Remember that? But then the Fortescue share price recovered through November and December 2021.

There has been another recovery through November 2022 for Fortescue, as China’s COVID restrictions were removed. This could lead to an economic boost like we saw in western countries during 2022.

Not only did the Fortescue share price rise over the year, but it also paid a full-year dividend of A$2.07 per share, adding around 11% to the return (excluding franking credits).

Due to the strengthening iron ore price, I don’t think I’m going to buy any more Fortescue shares unless there’s a significant fall, which could be triggered by a drop in the iron ore price to below US$100 again.

Duxton Water Ltd (ASX: D2O)

This company owns water entitlements and leases them out to farmers on short-term or long-term contracts. The Duxton Water share price rose around 6% over 2022.

Despite the very heavy rainfall that southeast Australia has experienced over the last year, water values have held up well, despite there being an abundance of the commodity at the moment.

With La Nina (the wetter weather pattern) on track to end soon, this could mean less ‘supply’ of water and could mean higher prices. But, I’m not basing my investment interest on a guess about the weather or short-term water entitlement price movements.

I think water entitlements are a good way to get indirect exposure to the large food sector in Australia. Plus, the ASX water share can offer differentiated returns to the S&P/ASX 200 Index (ASX: XJO).

At the current Duxton Water share price, it’s at a 14% discount to the post-tax net asset value (NAV). Plus, it’s forecasting dividend growth for the next couple of years, so I will be looking to buy more of this stock in 2023.

L1 Long Short Fund Ltd (ASX: LSF)

This ASX share is a listed investment company (LIC) that invests in a mix of ASX shares and international shares.

It has the ability to ‘short’ shares – betting that a share price will go down – as well as invest normally. This can mean that it can deliver stable, or even positive, returns during volatile years like 2022.

But, I think it’s worth saying that negative returns from its ‘long’ investments can still lead to negative overall returns – or the shorted shares can rise, which would also mean negative returns.

I’m looking to buy more shares of this LIC this year at a net tangible assets (NTA) discount in the high single digits or low double digits. I also like the idea of the growing dividend from this LIC.

The post My 3 top-performing ASX shares of 2022, and why I’m still buying 2 of them for 2023 appeared first on The Motley Fool Australia.

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More reading

• 3 defining moments for Fortescue shares in 2022
• 2 ASX 200 shares I’m never selling
• Iron ore price in 2023: Bull vs. bear
• Better buy for 2023: BHP vs. Fortescue shares
• 25% of my retirement portfolio is in these 5 ASX shares: Here’s why I believe they’re winners for 2023 and beyond

Motley Fool contributor Tristan Harrison has positions in Duxton Water, Fortescue Metals Group, and L1 Long Short Fund. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster 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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