This year, January 20 means a new administration in Washington. Making predictions about the economy and the stock market for the next four years is difficult, but we can expect a few trends to dominate the early part of this decade.
Prior to the Presidential election in November, Biden laid out his plans for the next four years. On January 14, Biden proposed a relief package totaling $1.9 trillion. Part of the proposal includes a third stimulus check of $1,400 for a large number of Americans.
Paul Brace, Clarence Carter Chair in Legal Studies and Professor, Department of Political Science, Rice University, suggests:
“Biden’s agenda is based on addressing America’s problems with economic inequality. If elected, Biden will change course, rolling back GOP tax cuts, applying a payroll tax on those earning over $400k, placing 75% of the burden of the tax hike on the top 1% of earners.”
Professor Brace continues, “In an era that has witnessed growing income inequality, while in the midst of a health crisis that has left many jobless or in highly threatened economic circumstances, Biden’s intent to shift an increasing share of financing programmatic efforts to address major economic, health and social threats, should find supporters.”
Sectors To Watch Under President Biden
For starters, the new President is expected to spend heavily on domestic infrastructure projects. When analyzing infrastructure businesses, we can choose from owners, including railroads and utilities, or enablers, including materials and construction firms. The strength of a company’s asset base and management, as well as growth prospects, valuation levels and financial metrics are significant points to research further.
In addition to increased spending by the federal and local governments, rock-bottom interest rates could help increase revenues in this sector. As a result, share prices of infrastructure companies should continue to benefit.
Second in line are firms that focus on alternative energy sources and technologies. Many analysts expect President Biden to carry out his pre-election projects on environmentally-friendly policies. In 2020, the alternative energy industry was red-hot and the segment is liable to grow more.
Last but not least, I expect technology to continue to be at the center of stock market growth in the coming year. The pandemic only accelerated various digitalization trends that are likely to stay with us in the near future.
Clinical Professor of Finance David Kass at the University of Maryland’s Robert H. Smith School of Business said:
“Additional investment and spending on infrastructure should create many jobs. An easing of tensions with our trade partners in Europe and with China, including the reduction or elimination of tariffs, should lead to a substantial increase in international trade and improved economic well-being for all countries involved.”
With that information, here are 7 President Biden stocks to buy:
- Amplify Lithium & Battery Technology ETF (NYSEARCA:BATT)
- CNH Industrial (NYSE:CNHI)
- General Motors (NYSE:GM)
- Invesco Dynamic Semiconductors ETF (NYSEARCA:PSI)
- Montrose Environmental Group (NYSE:MEG)
- SPDR S&P Kensho Intelligent Structures ETF (NYSEARCA:SIMS)
- United Rentals (NYSE:URI)
On a final note, most InvestorPlace.com readers would appreciate that well-managed robust companies that produce stable revenues will continue to do well irrespective of Washington politics. Therefore, for me, doing proper due diligence always takes precedence over making daily predictions.
President Biden stocks to buy: Amplify Lithium & Battery Technology ETF (BATT)
52-Week Range: $5.91 – $18.68
Dividend Yield: 0.4%
1 Year Change In Price: Up 51.2%
Expense Ratio: 0.72%
The Amplify Lithium & Battery Technology ETF is an exchange-traded fund (ETF) that started trading in June 2006 and invests in manufacturers or users of lithium battery technologies. For instance, these companies may provide battery storage solutions or battery metals and materials. They could also be electric vehicles (EVs) that rely on lithium batteries.
BATT currently has 73 stocks and tracks the EQM Lithium & Battery Technology Index. In terms of sectors, Materials (49.3%), Automobiles & Components (20.9%), Capital Goods (14.5%) and Technology Hardware & Equipment (6.7%) lead the roster.
The top ten stocks in this ETF make up about 45% of net assets of $72 million. EV star Tesla (NASDAQ:TSLA), China-based battery systems firm Contemporary Amperex Technology and EV giant Byd (OTCMKTS:BYDDY), global resources giant BHP (NYSE:BHP), and the largest South Korean chemical company LG Chemical (OTCMKTS:LGCLF) are among the heavyweights in the ETF.
Investors in this fund had a good year in 2020 and 2021 also started on solid footing: in January, the fund hit a record high, up about 14% since the start of the new year. Long-term investors could consider buying into the declines.
CNH Industrial (CNHI)
52-Week Range: $5.06 – $13.85
1 Year Change In Price: Up 26.1%
Our next stock comes from the other side of the Atlantic. U.K.-based global capital-goods group CNH Industrial, whose history goes back to the mid-19th century, also has significant U.S. operations. CNHI manufactures and markets construction and agricultural equipment, commercial vehicles, trucks and buses as well as specialty vehicles.
Q3 results released in early November showed robust results. Revenue was $6.49 billion, up 2% year-over-year (YoY). Free cash flow was $1 billion.
CEO Suzanne Heywood said:
“CNH Industrial’s Q3 2020 results were positively impacted by a general improvement… in market demand .. in particular, in the agriculture sector in North America. Results were also supported by our continued cost containment and cash preservation actions.”
CNHI stock’s forward price-to-earnings (P/E) and price-to-sales (P/S) ratios are 23.04 and 7.34, respectively. Look to buy the dips, especially if the price goes toward $11.5.
Finally, if you are also interested in environmental, social, and governance (ESG) investing, you may be interested to know that the company has a AAA rating from MSCI’s ESG Ratings.
General Motors (GM)
52-Week Range: $14.32 – $51.87
1 Year Change In Price: Up 46.5%
Our next company also has a long history. The car giant General Motors started operations in 1908. Since then, it has achieved tremendous brand loyalty. Q3 earnings showed revenues of $35.48 billion and net income of $4.05 billion. The automaker comes with a solid balance sheet and cash flow.
Investors are extremely pleased that GM invests in EV and autonomous driving projects. For instance, in early January, it introduced the futuristic BrightDrop brand, as an upcoming new electric commercial vehicle. GM is a leading partner in “Cruise,” the autonomous driving entity. Other companies in the partnership include Softbank (OTCMKTS:SFTBY) and Honda (NYSE:HMC). I believe the autonomous driving technology deserves to be on your radar screen.
Last year, GM also got significant attention when it withdrew its offer to purchase an equity stake in the EV group Nikola (NASDAQ:NKLA). InvestorPlace readers will be well familiar with the issues Nikola has been facing and how NKLA shares have come under pressure.
In January 2021, GM shares hit a record high. Its forward P/E and P/S ratios stand at 8.14 and 0.63, respectively. In the case of a decline toward $45, the shares would offer better long-term value.
Invesco Dynamic Semiconductors ETF (PSI)
52-Week Range: $44.68 – $119.08
Dividend Yield: 0.2%
1 Year Change In Price: Up 69.37%
Expense Ratio: 0.57%
Over the past decade, semiconductor shares have contributed significantly to returns in buy-and-hold portfolios. Investing in robust semiconductor businesses is an indirect play on continuing increases in the use of technology.
Therefore, investors may want to look at an exchange-traded fund (ETF) such as the Invesco Dynamic Semiconductors ETF. PSI, which tracks the the Dynamic Semiconductor Intellidex Index, has 30 holdings. The fund started trading in June 2005 and net assets under management are close to $500 million.
Several of the leading chip names in the ETF include Applied Materials (NASDAQ:AMAT), Micron (NASDAQ:MU), Lam Research (NASDAQ:LRCX), Broadcom (NASDAQ:AVGO), Texas Instruments (NASDAQ:TXN), Qualcomm (NASDAQ:QCOM) and Advanced Micro Devices (NASDAQ:AMD).
Year to date, the fund is already up over 12% and hit an all-time high in early January. I expect the fund to create shareholder value for many quarters.
Montrose Environmental Group (MEG)
52-Week Range: $16.41 – $43.60
1 Year Change In Price: Up 80.8% (since late July 2020)
Irvine, California-based Montrose Environmental Group went public in July 2020 at an opening price of $16.50. Now shares hover at $40. The company provides a range of engineering, scientific advisory, consulting and audit services for environmental projects.
In mid-November, MEG released Q3 metrics. Revenue came in at $84.7 million, up 47.0% YoY. Net loss was $30.7 million, compared to a net loss of $6.7 million in the prior year quarter. Diluted net loss per share was $2.99. A year ago it had been a loss of $1.34.
Management said the increase in net loss was “primarily due to non-cash fair value adjustments and non-capitalizable IPO expenses.” Cash and equivalents were $38.4 million, compared to $8.1 million a year ago.
CEO Vijay Manthripragada remarked:
“Demand for our environmental solutions, particularly organic demand, accelerated in the third quarter and allowed us to deliver strong results and maintain momentum. We believe Montrose’s performance remains resilient because of the world’s enduring focus on better environmental stewardship.”
Potential investors may regard any decline toward $35 as a better entry point. I expect MEG stock to reach new highs in the coming quarters.
SPDR S&P Kensho Intelligent Structures ETF (SIMS)
52-Week Range: $19.61 – $46.89
Dividend Yield: 0.6%
1 Year Change In Price: Up 41.4%
Expense Ratio: 0.45%
The SPDR S&P Kensho Intelligent Structures ETF provides exposure to the next-generation of intelligent infrastructure stocks. Those companies include smart building infrastructure, smart power grids, intelligent transportation infrastructure and intelligent water infrastructure.
SIMS, which has 45 holdings, started trading in December 2017 and follows the S&P Kensho Intelligent Infrastructure Index. The top 10 firms constitute more than 35% of net assets. Provider of heating, ventilating and air conditioning (HVAC) systems Carrier Global (NYSE:CARR), solid oxide fuel-cell technology group Bloom Energy (NYSE:BE) and residential security solutions provider Resideo Technologies (NYSE:REZI) lead the names in the roster.
Over the past year, the fund is up about 40% and year-to-date in 2021, it has already returned over 10%. I believe SIMS deserves your attention.
United Rentals (URI)
52-Week Range: $58.85 – $267.59
1 Year Change In Price: Up 68.6%
The largest equipment-rental company in the world, United Rentals boasts a market capitalization of $18.7 billion and over 19,000 employees. URI certainly deserves your due diligence, given annual revenues are around $10 billion and the group’s network of almost 1,200 rental locations in the U.S. and Canada.
According to Q3 finanvial results, quarterly revenue was $2.187 billion. Net income stood at $208 million and adjusted EPS was $5.40. Management also raised its full-year guidance. Q4 results are expected on January 28.
According to DataM Intelligence, “The Global Building Materials Market is expected to grow at a CAGR is 4.76% during the forecasting period (2020-2027).” Such growth would possibly benefit URI for many quarters to come.
Over the past year, United Rentals stock is up more than 68% and hit an all-time high early January. Buy-and-hold investors may regard any short-term profit-taking as an opportunity to buy into the shares of United Rentals. The business could potentially benefit from stimulus measures under President Biden, making it a good infrastructure stock pick.
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.