Mounting what was a gargantuan challenge in attempting to turn a deeply progressive and blue state red, firebrand talk show host Larry Elder — the so-called “Sage from South Central” — enjoyed significant support in the recall efforts against incumbent California Governor Gavin Newsom. In the end, it didn’t go the way Elder wanted, which has significant implications for stocks to buy.
First, let me extend gratitude to Elder for not only running a hard-fought campaign but also graciously acknowledging the results in what had to have been an extremely bitter concession speech. Given his popularity and the deep distrust that Republicans have about Governor Newsom, Elder could have sparked serious tensions — which may even have tilted the scales of which stocks to buy.
Fortunately, he took the classy road and he provided a framework for how everyone should conduct themselves in the face of defeat. I think we can all agree that we need more of that in American politics.
However, now that most of the votes have been counted — and erroneous or misleading claims of voting improprieties have been addressed and debunked — the big takeaway is that California residents overwhelmingly support the status quo, even if the Newsom administration has been far less than perfect. And I believe the result in itself is significant, perhaps not politically but certainly economically, setting the stage for stocks to buy.
Love the Golden State or not, it’s the fiscal powerhouse of the U.S. If California were its own nation, it would be the fifth-largest economy in the world, slotting behind Germany and just ahead of the U.K. Therefore, who runs the California government — and how the residents feel about it — is deeply important for not only the rest of America but also the entire world. Naturally, the recall results have significant implications for stocks to buy.
As well, policies in California tend to filter across the nation as Americans overall become more progressive and less religious — a dynamic that generally (though not overwhelmingly) tends to favor Democrats over Republicans. Therefore, these stocks to buy might not be just relevant to sun-drenched west coasters but eventually to everyone else.
- NextEra Energy (NYSE:NEE)
- Essex Property Trust (NYSE:ESS)
- Fisker (NYSE:FSR)
- H&R Block (NYSE:HRB)
- Smith & Wesson Brands (NASDAQ:SWBI)
- Axon Enterprises (NASDAQ:AXON)
- Amerco (NASDAQ:UHAL)
On a personal note, I’ve never met anyone that was enthusiastically supportive of Newsom, yet that is whom Californians want as their leader. Therefore, don’t treat this write-up as an endorsement of Newsom (or the Democrats) — it’s not. Nor is this an endorsement of the Republicans. Rather, it’s a discussion about political realities, realities that may spark sustained life in these stocks to buy.
Stocks to Buy: NextEra Energy (NEE)
With Governor Newsom and Democrats in general strong supporters of clean energy initiatives, the choice of NextEra Energy to lead this list of stocks to buy amid the California recall election is admittedly an obvious one. Nevertheless, for those who paid attention to the rumblings in the Golden State, NEE stakeholders must have breathed a sigh of relief.
It’s not just that NextEra has ties to the state — although it has that in droves. For instance, California is home to multiple planned initiatives under NextEra Energy Resources — a subsidiary of NextEra — which in total “could nearly double the total installed capacity of battery storage available in the U.S. today.”
More importantly, though, the recall result is a possible confirmation that voters are more forward-thinking than ever. As CalMatters.org pointed out, Newsom is “sometimes his own worst enemy by undermining his credibility and character.” Thus, he’s not that popular among Democrats. Nevertheless, voters chose Newsom again because they believe he has the right long-term agenda.
In terms of stocks to buy, there are fewer agendas that are gaining more bipartisan support than clean energy, which is why NEE is worth consideration.
Essex Property Trust (ESS)
Due to the unique circumstances stemming from the novel coronavirus pandemic, housing prices have shot through the roof across the nation. But the circumstance is especially conspicuous in California, an area which is notorious for ridiculously high cost of living. Worse yet for those living in highly desirable areas, the situation could get worse.
While real estate prices generally rise slowly and steadily, the Covid-19 crisis dramatically altered this paradigm. Naturally, many folks believe this rise is unsustainable, including yours truly. But there’s an argument to be made that in the Golden State, a correction might not arrive for a while. Let’s face it — everybody wants to move here whether they admit it or not.
Now, I use “everybody” in a hyperbolic sense but there’s truth to the exaggeration. Therefore, Essex Property Trust is a name you want to consider for stocks to buy. With multiple apartment complexes in the hot northern and southern California markets, Essex provides a home for those who are just shy of being able to buy a home in this ultra-competitive region.
Plus, factor in the higher wages that Californians earn and the outrageous apartment prices are really just par for the course.
Stocks to Buy: Fisker (FSR)
From the get-go, I’m going to disclose that I own shares of Fisker; therefore, some bias is present in my inclusion on this list of stocks to buy based off the recall. However, since I’ve talked at length about other electric vehicle firms, I think it’s time to share the love, whether I own FSR or not.
Based in Manhattan Beach, California, though, Fisker does have a connection to the Golden State. As well, the company’s core consumer demographic will undoubtedly come from its home market. Unlike the east coast where residents have ample public transportation options, in California, you’re not getting anywhere unless you have a vehicle.
Increasingly, though, the combustion car that has been the staple of California’s roadways has come under attack. Indeed, last year, Governor Newsom announced that his state will phase out gasoline-powered cars, issuing an executive order “requiring sales of all new passenger vehicles to be zero-emission by 2035.”
As a combustion-head myself, you can appreciate why I’m not Newsom’s biggest fan. However, under the coming automotive police state, if I had to go electric, I’d sure love to do it in a Fisker Ocean — assuming of course that the company can get it into production.
If you can overcome the risks, FSR is one of the stocks to buy because other states will probably follow suit.
H&R Block (HRB)
I don’t have many friends. But the friends I do have want to leave California. When pressed, they always respond with two answers: regulations and Democrats.
Personally, I think these are silly reasons to uproot yourself from your home and go live in another part of the country. Based on demographic and ideological shifts, the U.S. and many other western nations are leaning left — and there might not be anything anyone can do to stem the blue tide. But regulations? There’s something to this criticism.
In 2019, Newsom signed a bill that made it extremely difficult for companies to classify their workers as “independent contractors,” a measure that has serious tax consequences for both the independent worker and hiring/contract businesses. Long story short, the ridiculously crafted law — colloquially known as the gig worker’s bill — allegedly protected ride-sharing drivers at the expense of comedians and other independent workers, who suddenly lost opportunities.
There is one loophole — independent workers can become business entities. But that involves tax-related complications, cynically making H&R Block one of the stocks to buy.
True, HRB has been a choppy investment over the last several years. However, the gig economy is booming and the Covid-19 crisis has only made this lifestyle more attractive to employed worker bees. Against a long-term outlook, HRB could pleasantly surprise investors.
Stocks to Buy: Smith & Wesson Brands (SWBI)
After a blistering year of gun sales as concerned citizens flocked to firearms in fear of incoming social unrest — and let’s face it, they weren’t exactly wrong — companies like Smith & Wesson Brands enjoyed a dramatic increase in their market valuation. Considering its at-the-time-of-writing price of $21.51, SWBI has tripled in value since finishing its first session of 2020.
Of course, as people acclimated to the new normal and as the political vitriol lessened somewhat, the fear trade for firearms-related stocks to buy admittedly slipped. For instance, over the trailing month since Sept. 23, SWBI has shed nearly 10% in the market. And that fear would certainly subside even more if Larry Elder had won.
If you know anything about Elder, it’s that he knows two things very well: the law and firearms. Don’t expect him to support gun control legislation anytime soon.
But because Newsom retained his job, you can reasonably expect that Democrats — who are undoubtedly freaked out that Elder was even able to sniff the governorship — will attempt to press for more gun control measures. That might not be good for gun owners but it gives SWBI — and other gun-related stocks to buy — a massive fear catalyst.
Axon Enterprises (AXON)
If you ask critics of Newsom (and there are many) what he is weak on, chances are, you’ll hear these two things: apologies and crime. For the former, the man came off like the French word for shower when he apologized for violating his own Covid guidelines, inappropriate smiling and all. As for the latter, Newsom did not make any friends among conservatives when he placed a statewide moratorium on executions.
Regarding the death penalty, I’m not as gung-ho about it considering evidence of discrimination in our justice system. Nevertheless, Newsom also put new limits on police use of force, which is incredibly controversial. By constraining law enforcement, the mostly salt-of-the-earth types that comprise the ranks of police officers will have an extraordinarily difficult time performing their dangerous (and increasingly thankless) duties.
But that’s the way society is moving, which is why Axon Enterprises is one of the no-brainer stocks to buy for the long term. No, I can’t predict its near-term dynamics. However, more attention is paid on police officers to not only perform their duties but to do so in a legally kosher manner.
Axon Enterprises, particularly its body cameras, helps to tell the true story of police-civilian encounters, which is a must in the current societal environment.
Stocks to Buy: Amerco (UHAL)
We’ve come to the end my friend. And with Amerco, the parent company of moving equipment and storage rental firm U-Haul, I mean this quite literally.
Sure, the politics of California can be maddening, even for those voting for the winning side. Keep in mind that a major reason why Newsom found himself fighting for his political life was his glaring hypocrisies. Most notably, as he forced small businesses to close, he was hobnobbing with elite lobbyists at an extremely exclusive restaurant — sans masks of all things.
Remember, it’s not just Newsom: Americans generally dislike having a de-facto royalty class defining governmental policies. Indeed, former President Bill Clinton often wore a homely Timex in public to avoid coming off as an elitist. So I can appreciate why many Californians greatly dislike the pretentious Newsom.
Certainly, Americans are also a people of action. And that means for many, they’ve simply had enough and waving goodbye to the Golden State. Late last year, CNBC reported that California suffered a net migration loss — and I’ll bet that this trend continues to accelerate now that voters have shown no interest in changing its leadership.
That’s not great news for conservatives of the state but cynically, it bodes well for UHAL, making it one of the stocks to buy.
On the date of publication, Josh Enomoto held a LONG position in FSR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.