Jim Cramer says he likes these three industrial shares heading into 2023

CNBC’s Jim Cramer on Friday identified three industrial stocks he thinks are worth owning next year and said he expects them to outperform the sector’s top performers in 2022.

The best-performing industrial stocks in the S&P 500 so far this year have been Northrop Grumman, Lockheed Martin and deer — an increase of 36.9%, 35.6% and 25.7%, respectively. Looking ahead, however, Cramer said he would prefer to own ones like Caterpillar, Illinois Tool Works and railway operators CSX.

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Caterpillar, which reported strong gains two months ago, is up 12.6% year-to-date. Cramer said he prefers Caterpillar to machine manufacturer Deere.

“CAT is much more exposed to infrastructure, and I think they’re getting a boost from the oil and gas industry,” Cramer said. “Definitely worth owning here at 17x earnings,” he added.

Illinois Tool Works stock has fallen more than 12% in 2022 as fears of an economic slowdown have trumped the company’s actual results, Cramer claimed. “Of course I like it better here [so] for a pullback,” he said. “But I give you my blessing to buy ITW.”

Transports like CSX — down nearly 16% year-to-date — are “absolutely hated” on Wall Street, Cramer conceded. However, he said he believes CSX is attractive to investors with an extended time horizon.

“For me, it’s a long-term story. I see our east coast ports doing more business as shipping companies adjust to the fact that our west coast ports are dysfunctional. Meanwhile, CSX is just minting money with coal,” he said. “I think it’s worth buying by 2023.”

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