With President-elect Joe Biden about to be sworn into office, the U.S. will soon be led by a Democratic president. Further, the seemingly unlikely blue-wave scenario has actually come to be with Georgia turning blue. One result is that certain cheap stocks will see a massive boost.
The runoff elections in the conservative state that voted for Biden in November have provided a shock that will reverberate across markets. Democrats already held the House, with the Senate being Republican-controlled.
The Georgia runoff elections have provided a significant runway for Biden’s team. The Democrats now control the presidency, the House of Representatives and the Senate. Now that the Senate will no longer be Republican-controlled, Democrat consensus will face much less opposition. President-elect Biden should enter office with a guaranteed two years during which his initiatives will be very achievable.
This should clearly be a boon to stocks falling under Biden’s “Build Back Better” purview. So where should investors look for cheap stocks as Democrats gain control? Markets under Biden and Democrats will favor renewable energy, infrastructure modernization and a reshoring of U.S. supply chains, among others.
Here are seven cheap stocks to buy as Democrats gain control:
- First Solar (NASDAQ:FSLR)
- General Motors (NYSE:GM)
- Maxeon Solar (NASDAQ:MAXN)
- Forterra (NASDAQ:FRTA)
- Switchback Energy Acquisition (NYSE:SBE)
- Ericsson (NASDAQ:ERIC)
- Eagle Materials Inc. (NYSE:EXP)
Cheap Stocks: First Solar (FSLR)
First Solar is an Arizona-based solar company that employs 6,600 people. The company makes photovoltaic power systems and modules. Its solutions range from modules to turnkey power plants.
Solar energy had already gained significant traction globally and in the U.S. prior to the blue wave. Whether it’s marketed as decarbonization, renewable energy or anything else, it’s clear that global reliance on fossil fuels is declining.
But now that Biden has won, and both Houses of Congress are blue, solar will get an extra boost. This should give FSLR stock plenty of room to grow. The solar industry is receiving a lot of interest from market participants, making it somewhat overvalued. It probably will only get hotter.
The reason investors should buy First Solar shares is that, despite the company’s recent strengths, some are pessimistic on the stock. Current Wall Street coverage indicates that the company is a hold. However, the company has posted earnings-per-share (EPS) beats in each of the last two quarters.
Investors should rush into solar stocks, and FSLR shares could really break out given current market perception vis-à-vis earnings beats.
General Motors (GM)
It’s no secret that electric vehicles (EVs) were one of the hottest sectors of 2020. Tesla (NASDAQ:TSLA) truly led the sector, solidifying itself as a revolutionary automotive company. In the process, its stock has risen 720% over the last year.
Electric vehicles are becoming the new paradigm, and legacy automobile manufacturers are reaching a point where they will use their significant resources to compete in EVs. The point here is that Tesla has provided a robust proof of concept upon which General Motors will capitalize.
Further, Biden is very much pro-EV. According to an article from Car and Driver, a Biden presidency will lead to not only more EVs but also increased industry stability. All of this will provide the impetus for General Motors to increase its already significant EV efforts.
GM sold more than 20,000 of its Chevy Bolt countrywide in 2020. And the company is also producing a GMC Hummer EV, which should appeal to a wider consumer base in the SUV/truck-dominated U.S. market when it becomes available in late 2021.
Further, GM stock is relatively undervalued by traditional valuation metrics. The company carries a price-to-earnings (P/E) ratio that is better than three-fifths of the industry and a forward P/E ratio approaching the 90th percentile of industry peers.
Maxeon Solar (MAXN)
Maxeon Solar has strategic partners behind it, which should help establish it as one of the cheap stocks on investors’ radars. It is clear that energy companies are strategically considering their own future livelihoods as decarbonization efforts accelerate. Maxeon has spun off of SunPower (NASDAQ:SPWR) and is 35% owned by Total (NYSE:TOT).
It is clear that Democratic control will accelerate the transition away from fossil-fuel energy. Because of that, there should be an increase in traditional energy companies acquiring renewable interests therein. Companies like Maxeon Solar will benefit from the resources and know-how of energy-sector partners such as Total.
At under $40 per share, MAXN stock is a solar equity to consider picking up under Democrats. The company spun off from SunPower, which still uses its efficiency solar panels in its modules.
The company is strategically partnered with semiconductor firm TZS Zhonghuan and energy company Total. These firms control 29% and 35% of Maxeon, respectively, which gives it strong vertical integration. This company can really rise and is relatively cheap following 25% revenue growth between Q2 and Q3.
Forterra is a stock that fits well into Biden’s “Build Back Better” initiative. A build out of American infrastructure should occur during the next four years. America’s less-than-stellar infrastructure is certainly in need of updating.
FRTA stock is a great play upon that growth. The company manufactures drainage pipes and storm water systems. This is a company with Wall Street favor, having a buy rating and a current share price below $20.
The company provided strong Q3 results back in October when it announced a 23.7% increase in profits over the previous year’s period. Forterra also increased revenues to $28.8 million in the same quarter, which represented a 28.6% increase year-over-year.
Overall this stock looks strong in any environment, and if Democrats can stimulate infrastructure growth, this one should be a great pickup.
Switchback Energy Acquisition (SBE)
Switchback Energy looks like it should get a massive boost on the blue-wave news. My feeling is that it is set to rise regardless of who is in power, be it in the White House or either house of Congress. But given that Biden is pro-EV, the company has even more tailwinds pushing it forward.
Biden wants to push the government to install 500,000 EV plugs. Not much could be better for SBE as it brings the company public. For readers not yet familiar with ChargePoint, it is a leading provider of EV charging stations. In my mind, SBE stock sits at the confluence of several powerful market forces.
It serves the EV industry as a brand-agnostic provider of charging infrastructure. It’s also among the many, many EV plays coming to market via the SPAC route, making it popular. And now it should have even less trouble convincing investors to fund it, given that Democrats have gained control.
Further, SBE stock fits perfectly in President Biden’s “Build Back Better” initiative, which calls for a modernization of infrastructure. What could better represent a modernization of infrastructure than increasing EV utility across the U.S.?
Next on this list of cheap stocks is ERIC. Ericsson stock is cheap in dollar terms given that shares can currently be had for under $12. It is also moderately cheap from the perspective of its P/E ratios (forward included), which are better than half of the industry.
The modernization of infrastructure that Biden is calling for will include 5G infrastructure. This should pave the way for Ericsson to win more 5G contracts within the U.S. and abroad. The Swedish firm currently has 122 5G commercial agreements announced on its website, which boils down to a race between itself, Nokia (NYSE:NOK) and Huawei.
Huawei is leading the race, but security concerns are opening up opportunities for Ericsson and Nokia to really carve out a large chunk of this emerging industry. Biden is likely to continue the hard line on Huawei that President Donald Trump established.
Once 5G becomes fully built out, Ericsson has a great chance to really appreciate.
Martin Marietta Materials (MLM)
American innovation and ingenuity is stifled by a simple fact: Our aging infrastructure slows the transport of goods across our vast country. So when President-elect Biden and other Democrats call for a modernization of infrastructure, it clearly relates to our roads, bridges and highways.
And this is why Eagle Materials, a heavy construction-materials company in North Carolina, is certainly worthy of your investment dollars.
The company provides the materials, including stone, gravel and sand, that end up in the concrete and asphalt used to build infrastructure.
MLM stock may be considered a little better than a hold by Wall Street, but I believe there are reasons to consider it a strong buy aside from macroeconomic factors. In Q2 and Q3 the company achieved earnings beats. Further, the company has strong margins, both operating and net, which are indicative of profitability.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”