Election Day in the U.S. is fast approaching. Question marks related to election uncertainties, as well as a new stimulus bill and quarterly earnings, have increased market volatility lately. But fortunately for investors, there are always some solid stocks to buy no matter who wins the election.
“We found that elections had their greatest impact on equity markets when Election Day was imminent — in the final two to four weeks,” Chao Ma of Wells Fargo Investment Institute says in a recent study.
One concern that has been voiced in recent weeks is the possibility of delayed election results. Such a result may cause some investors to reduce exposure until there’s a result, says David Kass, a finance professor at the University of Maryland.
“However, a decisive outcome on election night should alleviate many of these concerns,” he says. “The main problem could be an extended delay in counting millions of mail-in ballots, especially in the swing states of Wisconsin, Michigan, Pennsylvania which provided the electoral vote majority for President (Donald) Trump in 2016 even though he won by less than 1% of the popular vote in each of those states.”
None of us has a crystal ball to predict what may happen to stock prices in the coming weeks. Yet, we possibly do not need to second-guess the markets, either.
Those investors who focus on robust stocks that have solid earnings, innovate, and create shareholder value will have winning portfolios over the long run, no matter what happens in the immediate future. Here are three names that should do well:
Stocks to Buy: iShares Core S&P 500 ETF (IVV)
52-Week range: $220.28 – $360.26
Dividend yield: 2.1%
Expense ratio: 0.04%, or $4 annually per $10,000 invested
The first pick is an exchange-traded fund (ETF), namely the iShares Core S&P 500 ETF, which, as the name implies, provides exposure to large, established companies stateside. The fund started trading in 2000. It tracks the S&P 500 index, a gauge for the U.S. stock market as a whole.
“On a historical basis, the S&P 500 index … has tended to rise after Election Day,” Ma says. “Historically, the S&P 500 has generated a 9% average return in the 12 months before an election and a 13% average return in the 12 months after — well above the 8% average return since the 1980s.”
Therefore, investing in a fund that tracks the S&P could appeal to a wide range of investors. The top ten holdings of IVV comprise around 28% of net assets, which stand at $220 billion. Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and
Amazon.com (NASDAQ:AMZN) head the list of firms.
Year-to-date, the fund is up 6% and hit an all-time high in early September. A trailing price-earnings ratio of 23.1 and price-book ratio of 3.6 suggest there may soon be some profit-taking in the fund. Any potential decline could offer long-term investors a better point of entry.
SPDR S&P Telecom ETF (XTL)
52-Week range: $48.47 – $78.04
Dividend yield: 1.1%
Expense ratio: 0.35%
Apple’s iPhone event in October has put the focus on 5G stocks. Many sectors and companies are expected to be positively affected by the increased deployment of 5G nationwide and globally. The XTL ETF provides access to firms in the telecommunications segment of the S&P. The fund started trading in 2011.
XTL has 43 holdings and the top 10 make up close to a third of net assets, which stand at $46 million. Raleigh, North Carolina-based communications platform-as-a-service provider Bandwidth (NASDAQ:BAND), San Jose, California-based provider of optical and photonic products Lumentum (NASDAQ:LITE), and Santa Cruz, California-headquartered manufacturer of integrated communications Plantronics (NASDAQ:PLT) are among the top names.
In terms of sector weightings, communication equipment (61.06%) tops the list, followed by alternative carriers (24.85%), wireless telecommunication services (7.60%) and integrated telecommunication Services (6.49%). Put another way, the fund’s emphasis on communications equipment sets it apart from many other ETFs in the sector.
Since the start of 2020, XTL is up 2.28% and hit an all-time high in August. Trailing P/E and P/B ratios stand at 17.93 and 1.84, respectively.
52-Week range: $26.00 – $85.98
Dividend yield: 2.82%
Houston-based Sysco is a global distributor of food and related products to the food industry and other establishments, such as schools, health care facilities, and hotels, that offer food outside the house. With over 300 distribution facilities, it serves clients in 90 countries. The company is sometimes referred to as “the other Cisco (NASDAQ:CSCO).”
Before the Covid-19 pandemic, many investors would have regarded the food-away-from-home industry as a relatively stable one. In the early weeks of the lockdown, however, the sector suffered considerably. For many companies, sales decreased around 50% from a year ago. On a brighter note, summer months have seen considerable recovery.
On Aug, 11, the company released Q4 and full year 2020 financial results. Quarterly sales were $8.9 billion, decline of 42.7% YoY. Similarly, gross profit decreased 47.4% YoY to $1.6 billion. As a result, loss per share was $1.22. CEO Kevin Hourican explained:
“While our fourth quarter and fiscal 2020 results were significantly impacted by the Covid-19 pandemic, we quickly responded by strengthening our balance sheet, adding new and different types of customers, and strategically committing resources to plan for the eventual return of demand.”
The group overall has a strong balance sheet and resources to turn this crisis into an opportunity in the coming quarters, making SYY on of the top stocks to buy. For example, Sysco could be able to gain market share from other smaller operators. Through cost-cutting measures, the company may also become a leaner organization.
So far in the year, the shares are down around 25%. Sysco is expected to release earnings next in November, and there may be increased choppiness in price. Its forward P/E and P/S ratios stand at 31 and 0.6 respectively. Long-term investors may regard any potential decline in price as opportunity to buy SYY stock.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.