Joe Biden is the favorite in the upcoming US elections. What stocks will take off if he wins? Here's how you can win with a Democratic candidate.
1. Green energy: an ultra-ambitious plan to move to clean energy
In July, Bloomberg reported that Biden, if he is elected head of state, intends to invest $ 2 trillion in moving the national energy to environmentally friendly sources. According to his plan, the full transition of the United States to clean sources should be completed by 2035.
According to Wall Street analysts, the election of a Democratic candidate will boost the green energy sector, making it a promising stock in key companies in the industry. First of all, those related to solar energy.
Specifically: NextEra Energy
NextEra Energy is the world's largest electricity company by market capitalization and the world's first in terms of wind and solar energy production. The company's third-quarter report exceeded analysts' expectations. Compared to the same period in 2019, net profit increased by 40% to $ 1.23 billion. NextEra Energy also raised its profit forecast for 2021.
The company distanced itself from politics and emphasized that it was ready for any election outcome. “We did well in the conditions that we had. If Trump is elected for a second term, then we expect our growth to continue and we will focus on our strategies. Biden, however, made it clear that Democrats are strongly in favor of renewable energy sources, "Barron's quotes NextEra chief financial officer Rebecca J. Kujawa.
Bank of America has assigned a Buy rating and a target price of $ 360. FactSet consensus forecast for NextEra Energy is $ 310.
Other renewable energy options:
2. Electric cars: Tesla and everyone else
Biden's presidency could give new impetus to the quotes of electric car manufacturers. He supported the Democratic plan to swap conventional cars in the United States for hybrid cars, either electricity or hydrogen.
Biden has declared his desire to see America as the world leader in the production of electric vehicles. He intends to invest $ 400 billion in automotive infrastructure, improving battery technology, and purchasing electric vehicles and electric trucks for the government.
Tesla is the obvious beneficiary of Biden's presidency. It is the largest company in the industry and the most valuable automaker in the world as a whole. Its shares are up over 420% this year.
On October 21, the company reported its third-quarter results and reported record profit and revenue. Elon Musk called the quarter "the best in history" and reaffirmed his commitment to delivering at least 500,000 vehicles to customers in 2020.
According to CFRA Research analyst Garrett Nelson, Biden's victory is beneficial to Elon Musk's company. Tesla would be one of the biggest winners as the electric car industry will be heavily subsidized by the Biden administration. It proposes expanding tax breaks and dramatically increasing the number of electric vehicle charging stations - about 20 times, ”Nelson said.
Other options in the field of electric vehicles:
3. Medical Marijuana Producers: Cannabis May Be Legalized at Country Level
In the United States, many states have legalized the use of cannabis, but federal laws still restrict access to medical marijuana. Because of this, banks and financial institutions regularly refuse to cooperate with the industry.
However, if Biden wins, this may change. Democratic vice-presidential candidate Kamala Harris said in October that if Joe Biden wins, he will allow marijuana at the federal level and rehabilitate previously convicted. After that, quotes for cannabis producers skyrocketed.
Specifically: Canopy Growth
Canopy Growth is one of the largest medical marijuana companies in North America. Its market capitalization exceeds $ 7 billion. And among its shareholders is the American brewing company Constellation Brands, which invested $ 4 billion in Canopy Growth in August 2018.
Canopy Growth is based in Canada and if Biden wins, it will be able to quickly break into the American market and take a large share there. In 2019, she entered into a merger agreement with the American marijuana producer Acreage Holdings.
Canopy Growth was supposed to buy back shares of a competitor for $ 3.4 billion, but in June 2020, the terms of the deal were revised. Canopy will now pay just $ 843 million for 70% of the company and will retain the right to buy the remaining 30%. The main condition of the deal is the legalization of the cultivation and use of marijuana at the federal level in the United States.
Other options in the cannabis grower area:
4. Infrastructure: construction and engineering companies
Should Biden win, the new administration is expected to pay close attention to the country's infrastructure - in particular, the renovation of bridges and highways.
According to experts from the research firm LPL Financial, a large package of infrastructure spending could become one of the first priorities for the Biden administration. And Citi analyst Andrew Kaplowitz believes that Biden's election program will contribute to the development of engineering and construction companies, including AECOM, Jacobs Engineering Group, and MasTec.
Specifically: Summit Materials
Summit Materials is one of the top 10 suppliers of sand, gravel, crushed stone, and cement for concrete production in the United States. Concrete is a key material for the construction of most types of buildings. In addition, a significant part of the company's revenue comes from the production and laying of asphalt concrete.
RBC Capital Markets believes that if Biden is elected, investors can look forward to a major infrastructure bill in early 2021. Analyst Michael Dahl assigned Summit Materials shares a target price of $ 25, which implies 26% upside potential.
Other options in the field of engineering and construction companies:
5. Chinese companies
“We will do a lot with China [if I am re-elected]. What they did to us is a shame. You are wearing a mask because of China, ”- these are the words of Trump. The President threatened to punish China for the spread of the coronavirus in the world and made it clear that he would stick to a tough line against China.
Earlier, Trump, in an effort to return American capital back to the country, began to impose protective duties on goods produced in China, which unleashed a trade war.
Biden is not expected to pursue such a tough policy towards China. Reducing the risks of a trade war should help the quotes of Chinese companies, which have been pressured by Trump's aggressive rhetoric over the past couple of years.
The Chinese tech giant became one of Trump's top targets in August. The president said Tencent's WeChat is collecting data from users in the United States, allowing the Chinese Communist Party to gain access to Americans' privacy. He signed decrees banning Americans from doing business with WeChat and its owners, after which Tencent shares fell 10%.
Biden's win could be a boon for Tencent if the new administration stops attacking it. This is a likely scenario: in the Biden camp, they are talking about the need to pursue a different policy towards China. "There is a confrontational component in relations with China, an element of rivalry, as well as cooperation," CBS quotes the adviser to the Democratic candidate Tony Blinken.
Other options among Chinese companies: