Jim Cramer says he likes these 3 industrial stocks heading into 2023

CNBC’s Jim Cramer on Friday identified three industrial stocks that he believes are worth owning next year, saying 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 Deere — up 36.9%, 35.6% and 25.7%, respectively. Looking ahead, though, Cramer said he’d prefer to own the likes of Caterpillar, Illinois Tool Works and railroad operator CSX.

Shares of Caterpillar, which reported strong earnings two months ago, have climbed 12.6% year to date. Cramer said he favors Caterpillar over fellow machinery maker Deere.

“CAT has much more exposure to infrastructure, and I think they’ve got a boost from the oil and gas industry coming,” Cramer said. “Definitely worth owning here at 17 times earnings,” he added.

Illinois Tool Works shares are down more than 12% in 2022 because fears of an economic slowdown have trumped the company’s actual results, Cramer contended. “I like it here, of course more [so] on a pullback,” he said. “But I give you my blessing to buy ITW.”

Transports such as CSX — down nearly 16% year to date — are “totally hated” on Wall Street, Cramer acknowledged. However, he said he believes CSX is attractive for investors with extended time horizons.

“For me, it’s a long-term story. I see our East Coast ports getting more business as shipping companies adjust to the fact that our West Coast ports are dysfunctional. In the meantime, CSX is just minting money with coal,” he said. “I think it’s worth buying going into 2023.”