33 growth stocks to own in 2023

We've already seen at the beginning of 2023 how a bit of good news can dramatically improve sentiment. Here are the growth stocks this City expert is backing to succeed this year.

Stocks including Telecom Plus (LSE:TEP), WH Smith (LSE:SMWH) and JD Sports Fashion (LSE:JD.) have been given the backing of a City bank as it looks for a better year for its top growth picks than it saw in 2022.

Peel Hunt’s 39-strong list from last year fell by an average of 30% as rising interest rates and the deteriorating economic outlook caused investors to rotate away from growth.

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

The bank admits there’s unlikely to be much of a tailwind for growth this year, but reminds investors that there will always be companies capable of bettering their market positions through investment, acquisitions or self-improvement.

Its 33 growth picks for this year range in market size from JD Sports down to Porvair (LSE:PRV) and span 15 sectors, with retailers and technology the most exposed through four companies each.

The best performers on the 2022 list were oil and gas firm Energean (LSE:ENOG) with a 59% total return followed by Gulf Keystone Petroleum Ltd (LSE:GKP) at 57% and corporate merchandise firm 4imprint Group (LSE:FOUR) with 54%.

Only six stocks delivered a positive return, while fast fashion business ASOS (LSE:ASC) and eyewear maker Inspecs Group Ordinary Shares (LSE:SPEC) were the worst performers with declines of 88% and almost 80% respectively.

JD Sports Fashion also fell heavily in 2022 but Peel Hunt has kept faith in the US and UK-focused sportswear retailer for this year, based on its target price of 250p.

The bank’s retail team said ahead of this week’s Christmas sales update: “Trading momentum remains strong, and there is little doubt that this is an industry where the strong can get stronger. The valuation is half what it was and we see material upside.”

Dunelm Group (LSE:DNLM) is seen as a recessionary winner and is on the bank’s list for another year, with the bank encouraged by the prospect of the homeware retailer’s continued outperformance.

It said: “Strong cash returns create a compelling yield but the real attraction here is the prospect of Dunelm driving market share up to mid-teen levels over the medium-term.”

WH Smith was one of the more resilient performers on last year’s list and retains its place this time, with Peel Hunt having a price target of 2,300p. It said the view of the company as a UK retailer with “a bit of travel” was outdated given that its two recent major US acquisitions had galvanised overseas operations.

Peel Hunt notes that UK retail is set to account for less than 15% of earnings in 2025 as the footprint in US airports continues to evolve: “The price/earnings multiple is not low compared to its pure retail peers, but they lack WH Smith’s global opportunity.”

• 2023 Investment Outlook: stock tips, forecasts, predictions and tax changes
• Stockwatch: what now after 40% profit in under three weeks?
• 11 ways to invest your ISA like Warren Buffett

Elsewhere in the area of travel, Peel Hunt is backing the Upper Crust owner SSP Group (LSE:SSPG) to deliver rapid profit growth and cash generation over the next three years and believes the valuation fails to reflect this after highlighting a price target of 325p.

Online ticketing firm Trainline (LSE:TRN) is also on the list of growth stocks for another year, despite the current uncertainty caused by strike action on the railways. Peel Hunt said: “The noise in the UK unfortunately has a direct impact on the share price.

“However, this ignores Trainline’s huge progress versus pre-Covid, the changes in Europe, and the innate operational gearing of this model.” The price target is 487p.

And Peel Hunt regards the current rating of Wizz Air Holdings (LSE:WIZZ) as far too low for the current growth potential, which is built around ambitions to treble its fleet to 500 by the end of 2030 and to up the aircraft size. The shares are backed to reach 3,400p.

One of the growth stocks that Peel Hunt believes is well placed for the tougher times is Telecom Plus as customers look to the Utility Warehouse business to reduce the cost of essential services. Shares have enjoyed a strong run in the FTSE 250 index but the bank believes there’s scope to reach 2,600p.

It said: “The company has a 3% share of UK households, so there is plenty of room for the business to be materially larger and more profitable.”

Two of the best performing growth stocks in 2022 have been backed for further upside, with Peel Hunt having a target price of 4,600p on 4imprint due to the opportunity for continued market share growth in 2023.

On Gulf Keystone Petroleum, there’s a target of 340p for the owner of the world-class Shaikan oilfield in Kurdistan. Robust production during last year helped the business generate record cash flow and return $215 million (£177 million)  to shareholders, equivalent to a 41% dividend yield.

Peel Hunt said: “The investment being made now and during 2023 should support multi-year production growth, as the significant inherent value within its asset base is unlocked.”

• Why these could be 10 of the most reliable shares for investors in 2023
• 10 small-cap shares to lead a recovery in 2023
• Insider: a six-figure purchase at this popular mid-cap 

The bank’s other favoured growth stocks are: Alpha Financial Markets Consulting Ordinary Shares (LSE:AFM), Auction Technology Group (LSE:ATG), Bank of Georgia Group (LSE:BGEO), Boku Inc Ordinary Shares (LSE:BOKU), Ceres Power Holdings (LSE:CWR), CVS Group (LSE:CVSG), discoverIE Group (LSE:DSCV), Dr. Martens Ordinary Shares (LSE:DOCS), Empiric Student Property (LSE:ESP), Ergomed (LSE:ERGO), Impax Asset Management Group (LSE:IPX), Inchcape (LSE:INCH), Intermediate Capital Group (LSE:ICP), Kin and Carta (LSE:KCT), Lok'n Store Group (LSE:LOK), Oxford BioMedica (LSE:OXB), Porvair (LSE:PRV), Renew Holdings (LSE:RNWH), SigmaRoc (LSE:SRC), Tharisa (LSE:THS), Treatt (LSE:TET), Tullow Oil (LSE:TLW), Vistry Group (LSE:VTY) and YouGov (LSE:YOU).