The election is just around the corner. And while there’s plenty of drama surrounding the event, investors are anxious to know how it will affect their portfolios. The market will certainly move around the event, but election stocks should be on everyone’s radar — including the bipartisan ones.
What are bipartisan stocks?
Simply put, I want to look at names that should do well no matter what the outcome of the election is. Whether that’s a President Donald Trump or former Vice President Joe Biden administration, or a Republican or Democrat Senate — it doesn’t matter.
While the two parties are seeing what feels like a historic divide, there are at least some things they can agree on.
On this note, David Kass, Clinical Professor of Finance at the University of Maryland’s Robert H. Smith School of Business, had this to say:
“The number one priority for investors should be a stimulus bill. The larger the stimulus bill, and the sooner it is passed by Congress, the greater will be the positive reaction on Wall Street. The second most important issue is when will a vaccine be approved by the FDA and made available….
President Donald Trump needs to focus on the economy getting back to full speed once we have a safe and effective vaccine for Covid-19 and it is generally available….
Although former Vice President Joe Biden is planning to raise taxes on high income earners and corporations, he is also planning to spend more to stimulate the economy by assisting those who were hurt by the lockdowns and overall reduction in economic activity induced in response to the coronavirus. Additional investment and spending on infrastructure should create many jobs.”
With all of that in mind, let’s take a closer look at these seven bipartisan election stocks:
- Caterpillar (NYSE:CAT)
- United Rentals (NYSE:URI)
- Microsoft (NASDAQ:MSFT)
- Honeywell (NYSE:HON)
- DraftKings (NASDAQ:DKNG)
- Delta Air Lines (NYSE:DAL)
- Southwest Airlines (NYSE:LUV)
Now, let’s dive in and take a closer look at each name.
Election Stocks to Buy: Caterpillar (CAT)
David Kass had a great point when he mentioned Biden’s likelihood to leverage an infrastructure bill to generate jobs growth. The truth is, both sides are likely to target infrastructure. It’s an easy way to pump a ton of money into the economy.
If that ends up being the case, Caterpillar will make for an excellent beneficiary.
An infrastructure bill is the perfect way to spur job growth because it has such an immediate trickle-down effect. Plus, our country is in a pretty high need of some infrastructure upgrades anyway.
That said, Wall Street has a similar thought. Before the recent market-wide volatility, Caterpillar stock hit a new all-time high. That’s even with all the headwinds it’s seeing. And while the company just beat on earnings and revenue estimates, sales fell more than 22% year-over-year in the most recent quarter.
Does that sound like a recipe for new all-time highs?
It doesn’t sound like it to me, either. However, investors realize that a stimulus bill is going to get pushed through eventually. And if the government can get a deal done, Caterpillar and its heavy machinery will see a spike in demand.
United Rentals (URI)
While crews use Caterpillar machinery to move the earth around, the rest will be working with United Rentals’ sales team. It’s inevitable that big projects need to lean on companies like United Rentals to get the job done.
The company consists mainly of two businesses: general rentals and trench, power and fluid solutions.
The general rentals units rents out exactly what one would expect: construction and industrial equipment, tools and services for companies. It’s the business that makes sure contractors and workers have the right equipment for the job.
The second unit is a bit more specialized. It can include everything from trench shields to construction lasers, HVAC and generators, among others.
Overall, it doesn’t matter if the job is taking place in Michigan, Arizona or Florida. Or at least, it doesn’t matter to United Rentals.
Election Stocks to Buy: Microsoft (MSFT)
Big tech often draws the ire of the government. President Trump has railed against Amazon (NASDAQ:AMZN) on numerous occasions, while Democrats have routinely brought in the heads of social media and big tech to testify in D.C.
However, Microsoft is different.
While most of FAANG has come under scrutiny, Microsoft hasn’t. The calls for a breakup have gotten louder for Amazon, Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). And in some cases, the anticompetitive chants have started up, too.
Not Microsoft, though. It served its time with the government when it was ruled to have monopolistic qualities in 1999.
This time, as trouble grows for its peers, Microsoft is left off the list despite its $1.52 trillion market capitalization. It also helps that Microsoft works with the U.S. government, most publicly with its $10 billion JEDI contract win.
Either way, it seems unlikely that Microsoft finds itself on the government’s “naughty list” regardless of the election outcome.
Both presidential candidates are going to look at ways to bring the economy back to life in 2021 and beyond.
That said, Honeywell is one of the higher-quality industrial stocks out there. However, the company has endured a bumpy 2020 thanks the historical volatility thrust upon the global economy. But like the industrial sector as a whole, Honeywell is a cyclical. In short, it does well when the economy does well.
When the automotive, construction, industrial, infrastructure and manufacturing spaces are doing well, Honeywell generally is too. Like I said, when the economy is humming, Honeywell is humming.
As I said above, no matter who wins the election, they will look to jumpstart the economy. That may include throwing a lifeline to manufacturers and airlines. It could include infrastructure spending. Overall, though, the plan will likely involve trillions of dollars — and that’s going to benefit Honeywell.
The company operates across many areas, which are not limited to but include safety equipment, healthcare, pharma, manufacturing and supply chain management. It also has an Industrial Internet of Things business unit, while the stock pays out a dividend yield of 2.3%.
Election Stocks to Buy: DraftKings (DKNG)
Like Microsoft, DraftKings is an interesting name for this list. I want to point out that neither party or candidate is likely to push for DraftKings’ success. However, neither should stand in its way, either.
The simple fact of the matter is that legalized sports betting continues to gain momentum. In 2018, New Jersey won a Supreme Court ruling that allowed states to legalize sports gambling. Since then, other states looking to generate additional revenues have considered this avenue. There could also be bipartisan support at the federal level, too. Consider this:
“At the same time various state lawmakers are considering sports betting legislation, Congress is too. Senators Chuck Schumer, D-N.Y., and now-retired Orrin Hatch, R-Utah, co-introduced comprehensive sports betting legislation at the end of 2018.”
Some investors may prefer a brick-and-mortar operator, like MGM Resorts (NYSE:MGM). That’s fine too. However, DraftKings has proven it can safely and effectively roll out in various locations and handle online sports bets.
Collectively, it should continue fueling its growth as the novel coronavirus passes and as more states look to generate tax revenue. Therefore, DraftKings is one of our bipartisan election stocks to watch.
Delta Air Lines (DAL)
No matter which party is involved, both have a vested interest in seeing U.S. airlines stay afloat. No one benefits when the airlines buckle and that should gain support among both parties. As a result, Delta Air Lines is a part of the bipartisan election stocks list.
The company recently reported earnings, and it wasn’t pretty. Delta lost billions of dollars and saw its revenue plunge. However, the situation is starting to improve.
Company President Glen Hauenstein said:
“…Net cash sales improving from $5 million to $10 million per day at the beginning of the quarter to approximately $25 million to $30 million per day at the end of the quarter.
With a slow and steady build in demand, we are restoring flying to meet our customers’ needs, while staying nimble with our capacity in light of COVID-19…While it may be two years or more until we see a normalized revenue environment, by restoring customer confidence in travel and building customer loyalty now, we are creating the foundation for sustainable future revenue growth.”
It won’t be an overnight return to success, but it’s silly to think that consumers will stop flying. And that make DAL stock a great bipartisan election stock.
Election Stocks to Buy: Southwest Airlines (LUV)
Another airline that qualifies for the bipartisan election stocks list? Southwest Airlines.
Like Delta, Southwest has been hammered over the last two quarters. Traffic has dried up, causing revenue to plunge. Earnings also went from positive to negative as the airlines continue to burn cash.
However, the situation is improving. TSA traffic is on the mend, recently recording its first day with more than 1 million travelers in a single day. That’s the first time the total has topped seven figures since the pandemic started.
Furthermore, Southwest Airlines is considered by many to have the strongest balance sheet and best financials. Perhaps that makes it less of a concern from lawmakers. However, it will be more of an industry-wide boost rather than a case-by-case situation.
The simple fact of the matter is this: Southwest Airlines is down the least among its peers, in part thanks to its status as a high-quality operator. Earlier this year, management was sure to point out that Southwest is “the only investment-grade credit rating in the U.S. airline industry by all three agencies.”
Airlines have seen better days, but eventually these tough times will pass. No lawmaker wants them fail and for that reason, they likely won’t. Thus, consider LUV stock.
On the date of publication, Bret Kenwell held a long position in AAPL, GOOGL and DKNG.