In the lead-up to the first round of the French election, French stocks were battered. Investors became wary of the potential for either a far-right or far-left victory. The prospect of a notable increase in government spending under either extreme threatened to undermine France’s already fragile finances. However, this may be the time to shine for some French election stock picks.

Following the far-right Rassemblement National (RN) or National Rally’s win in the first round of the French election, the markets experienced relief . The rally likely reflects investor optimism about a more business-friendly setting. A conservative, right-wing government usually favors sectors such as defense, energy and manufacturing. These sectors benefit from deregulation, tax incentives and increased government contracts.

Defense companies, for example, are likely to see boosted spending on national security. Meanwhile, energy firms could benefit from policies favoring traditional energy sources over renewables. Further, manufacturing companies might enjoy growth through heightened investments in advanced technology and infrastructure.

In this article, we will explore three French election stock picks that are well-positioned to benefit from the new political landscape. Leading in aerospace, defense, major energy production and advanced manufacturing, these companies are poised to benefit from the favorable policies. Increased government support is anticipated under a potentially new right-wing administration.

Thales S.A. (THLLY)

First among our French election stock picks is Thales S.A. (OTCMKTS:THLLY), a global leader in aerospace, defense and security. This company is likely to be one of the major beneficiaries of a ring-wing party win. The $31.8 billion giant focuses on developing technology solutions for clients in aerospace, space, transportation and defense. Thales is well-positioned to capitalize on government contracts tied to these industries.

A right-wing government, usually favoring higher national security and defense spending, is likely to boost Thales’ prospects. The National Rally party is likely to prioritize boosting military capabilities and national security infrastructure. The company’s expertise in defense electronics, cybersecurity and critical infrastructure protection aligns with the party’s priorities, which makes it a key player in the anticipated increase in defense budgets.

Note that Thales has already been experiencing strong tailwinds from the current volatile geopolitical environment, including the massive military assistance the United States and its European allies provided to Ukraine. In the first quarter of 2024, Thalles celebrated an order intake of €5.0 billion, up 47% year-over-year, exemplifying the positive outcome of increased defense spending even prior to a right-wing government.

TotalEnergies (TTE)

TotalEnergies (NYSE:TTE), one of the largest energy companies globally, is poised to be another trending stock during the French elections. This is because TotalEnergies will potentially benefit from a definitive Marine Le Pen victory. The energy behemoth operates in all oil and gas industry value chain parts, including exploration, production, refining, transportation and marketing. Therefore, it is reasonable to assume that the stock stands to benefit from a right-wing government.

The National Rally party’s policies are likely to favor traditional energy investments. If the party gains a decisive majority, we can expect a strong focus on energy security, potentially accompanied by oil and gas exploration and production incentives. This will likely lead to increased investments that will eventually benefit the sector. As the largest energy firm in France, TotalEnergies is going to lead this trend.

In the interim, it’s worth noting that TotalEnergies is currently trading at a mere 7.7 times its forward earnings, a valuation below its historical norm. This adds to the stock’s appeal as a compelling investment among energy stocks. If oil prices stay robust in the upcoming quarters, I expect the stock will experience multiple expansions, leading to notable total return potential, complemented by the potential benefits from a right-wing government.

Dassault Aviation (DUAVF)

Similar to Thales, Dassault Aviation (OTCMKTS:DUAVF) is another leading French aerospace manufacturer known for its advanced military and business jets. The company designs, builds and supports a range of aircraft, including the Rafale fighter jet and Falcon business jets, which are renowned for their technological sophistication and performance capabilities.

Under a right-wing government, Dassault Aviation, like its industry peers. is set to benefit from increased defense expenditures. The company has already experienced robust sales and earnings growth in recent years, a direct result of higher defense spending in Europe due to the ongoing war in Ukraine. Notably, Dassault’s sales and earnings per share (EPS) have risen at a compound annual growth rate (CAGR) of 11.4% and 12.6%, respectively.

Apart from the potential boost from a Le Pen victory, though, Dassault’s investment case remains robust. Its long-standing partnerships with national and international defense forces, including the French Air Force and Navy, and its successful exports to nations like India and Qatar strategically position Dassault to continue thriving in the favorable aerospace market, irrespective of election results.

On the date of publication, Nikolaos Sismanis did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.