With a new administration comes stocks to sell, but just when you thought the drama involving the 2020 election was over, Fox News revealed a startling story. Recently, two Los Angeles men were arrested after attempting to submit 8,000 ballot applications in place of nonexistent or deceased U.S. citizens. The effort involved fraudulently attempting to get one of the arrested men to become mayor of Hawthorne, California.
Obviously, this incident proves that voter fraud is an unfortunate reality. However, does fraud to a significant enough magnitude exist to overturn the presidential election? That is taking the criminal matter to an entirely new dimension. From the available evidence that we have, there are no credible signs of voter fraud. Therefore, we can reasonably state that Joe Biden won the 2020 presidential election in fact, but perhaps not in alternate reality.
Moving forward, strategies for positioning your portfolio will take many interesting turns. Technically speaking, the Dow Jones Industrial Average tends to perform better under a Democratic presidential administration rather than under Republican rule. Since 1900, the average return for Democrats is nearly 102%, whereas for Republicans, it’s about 65%.
Of course, stating facts like that can be dangerous because they imply that Democrats run the economy better than their counterparts. In reality (that is, real reality), Republicans have the misfortune of presiding over terrible events, like the Great Depression and Recession and now, the novel coronavirus pandemic. Take out these anomalies and Republican performance exceeds that of Democrats (108% to 102%).
Still, that’s not a great comparison because you’d need to take out at least one of the Democrats’ worst figures. What we can say is that liberals tend to be more human in their policies. For instance, President Franklin D. Roosevelt signed the Social Security Act during the Great Depression. President Barack Obama enacted the first-time home buyer tax credit to lift us from the Great Recession.
These measures demonstrate that Democrats generally think of resolving problems from the bottom up, not the top down (i.e. Reaganomics). Therefore, this presidential election will likely have a significant impact on the market’s trajectory. But some companies may not benefit for various reasons. Here are the stocks to sell:
To be clear, these aren’t outright stocks to sell indefinitely. Rather, with a new administration coming in at this particular moment with the Covid-19 crisis, there will be some winners and sadly, some losers. Here is my take on which names to avoid now that Biden has decisively won the presidential election.
Stocks to Sell: Occidental Petroleum (OXY)
On the surface, the presidential election bodes poorly for embattled fossil-fuel-related companies like Occidental Petroleum. According to the Biden Plan, the incoming administration will implement policies that will get the U.S. to achieve net-zero emissions no later than 2050. Naturally, this puts securities like OXY stock on the fundamental hot seat of stocks to sell.
However, shares have performed well despite the results of the presidential election favoring Democratic rule. In part, this enthusiasm may be due to clean energy solutions not being robust and voluminous enough to support holistic net-zero emissions. While we may want to phase out “dirty” energy completely, that’s probably not going to happen in our lifetimes.
Still, that doesn’t mean OXY stock is a buy. Rather, this is one of the stocks to sell into strength. Given the financial vulnerability of Occidental Petroleum, oil prices will need to rise much higher from where it is now. But that requires consumer demand to increase, an extraordinary challenge due to soaring daily coronavirus infections.
CONSOL Coal Resources (CCR)
If I’m being completely honest, there’s a case to be made that CONSOL Coal Resources belongs on your contrarian list of stocks to buy rather than stocks to sell. Sure, the presidential election poses fundamental and sentiment problems for CCR stock. After all, coal has a dirty reputation that is the antithesis of the environmental, social and governance (ESG) investing movement. But here’s the deal – facts are facts.
Perhaps the most important fact involving CCR stock is that fossil fuels are more energy dense than other sources. In contrast, solar and wind are fundamentally inefficient. You can make them more efficient compared to prior technologies. But because these clean energy sources are also intermittent, you need much real estate along with an extensive network of battery storage systems.
With coal, you burn it and you’re good to go.
Nevertheless, because of the results of the presidential election, most investors should avoid CONSOL Coal Resources. You don’t want to short this company, but the concerted push for green energy will be distracting.
Wells Fargo (WFC)
Perhaps the most controversial idea among stocks to sell on this list is Wells Fargo. Though big banks represent economic bellwethers, WFC stock has grossly underperformed its major competitors. Of course, that’s due to the underlying company’s internal problems that are unique to it. That alone may convince you to stay away from this financial giant.
At the same time, my InvestorPlace colleague Larry Ramer noted that WFC stock is poised to surge longer term. In part, he makes this comment because of encouraging developments in the coronavirus vaccine race. “These drugs are likely to ignite the economy, releasing tremendous pent-up demand from consumers by the end of the first half of 2021.” As well, such growth could cause the Federal Reserve to raise interest rates, “raising the bank’s net interest income.”
But raising rates would act as a deflationary measure, which is not what you need for Main Street. Instead, we saw that massive stimulus may have been the only thing that saved us from going over a cliff. Naturally, stimulus measures are inflationary, which will lower net interest income for Wells Fargo and the big banks.
When the pandemic hit, one of the most severely damaged sectors was the restaurant industry. With people fearful of going out and possibly consuming contaminated food, it’s no wonder that fast-casual eateries like Wingstop took a beating.
However, following the March doldrums, WING stock made a remarkable comeback. Still, with the implications of the election, I’m not sure if WING can continue winging it.
For one thing, shares aren’t too far above where they were in May. Essentially, with the erosion of the summer premium, WING stock hasn’t made much progress. Second, both coronavirus cases and deaths have increased substantially, portending further restrictive mitigation protocols. Obviously, that’s not great for business.
True, Wingstop lends itself to the takeout and delivery model. But according to Jungle Scout’s recent consumer survey, “61% of consumers are worried about their current financial situation, up from 56% in May.” This doesn’t augur well for the restaurant industry generally as cutting down on take out is one of the easiest budget moves to make.
Plus, with fierce competition and the Biden administration’s likely penchant for shutdowns, it will be difficult for Wingstop to distinguish itself in a terribly unfair environment.
Since the ride-sharing industry launched, nothing seemed to be able to stop the progress of individual players like Lyft. Then the coronavirus came into the picture and changed everything. Not surprisingly, LYFT has been one of the stocks to sell during this pandemic because of the severe disruption to its business. However, a critical legal victory, Proposition 22 in California, delivered LYFT stock a lifeline.
Long story short, legal battles pertaining to the exact nature of ride-sharing drivers – whether they were independent contractors or employees entitled to benefits – plagued Lyft and rival Uber (NYSE:UBER). Last year’s passage of California’s AB 5 brought a more restrictive definition to who actually qualifies as being an independent contractor, or “gig worker” if you will. But the passing of Prop 22 gave ride-sharing drivers an exemption, allowing them to operate independently.
As a result, LYFT stock jumped higher following the election as this was one of the down ballot issues. Still, the victory may be short-lived as Lyft doesn’t have the extensive food-delivery services of Uber. Plus, the Democrats could start formulating new ways to ensnare ride-sharing companies into labor-friendly laws.
As a leader in gunshot detection, location and forensic analysis, Shotspotter is an incredibly relevant name in our firearms-friendly culture. As the Washington Post noted before, we have more guns in the U.S. than we do people. Just based on simple probabilities, you must figure that at least a few will discharge inappropriately. That right there bolsters the case for SSTI stock.
Cynically, there was another argument supporting Shotspotter. Throughout this crisis, social tensions exploded higher. Most of it was due to cries for social and racial justice, which is completely understandable. However, I like to think that most of this violence wouldn’t have erupted had the federal government backstopped payrolls and committed to consumer-level economc stability. That it didn’t enabled some of the violence, making SSTI stock a fundamentally logical bet.
However, Shotspotter has been one of the more disappointing names. As well, following the election, the threat of violence seems minimal because most of the country is relieved that the incumbent is leaving office. Therefore, if SSTI isn’t one of the stocks to sell, it’s probably one to avoid.
One of the most conspicuous impacts that the 2020 election will have is regarding the trajectory of our foreign policy. During the Trump administration, the U.S. normalized relations with Russia. However, this rankled the opposition because Russia didn’t do anything that would deserve such normalization. But with Biden, he seems to be more in line with public opinion. If I’m reading the political tea leaves correctly, his administration will apply more pressure on Russia.
In that case, I don’t have the warm and fuzzies for companies like Rostelecom. Billed as the largest digital services provider in Russia, Rostelecom has incurred a shaky performance since bouncing higher from the March doldrums. In addition, ROSYY stock has never recovered from the severe collapse suffered during the 2008 global financial crisis.
Also, keep in mind that according to Worldometers.info, Russia is fifth in total coronavirus cases. Earlier, it was in the top three until the second wave in Europe dropped it a few places from the upper echelons of ignominy. Still, cases could flare up again as it did in other countries, putting ROSYY stock at risk.
Several years ago, the late Senator John McCain blasted Russia as a “gas station masquerading as a country.” In his view, economic sanctions against the Russians were effective to penalize their belligerence. Of course, the Russia of today is far different than the Soviet Union of yesteryear. Still, the country’s economy is still very much tied to fossil fuels, which makes organizations like Rosneft risky.
Rosneft is a Russian integrated energy company and specializes in exploration, extraction, and production, among many other cogs in the energy supply chain. Unfortunately, this places substantial pressure on OJSCY stock as demand just doesn’t exist. For oil companies of any national origin to survive and thrive, per-barrel prices must increase notably. That’s just not happening and may not happen for a while considering the global surge in coronavirus cases.
Moreover, the new ugly in U.S.-Russia relations under a Biden administration is not going to be helpful for OJSCY stock. With so many variables, I believe Rosneft is one of the stocks to sell or at least avoid for green pastures.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.