It is quite possible that not only will presumptive Republican nominee Donald Trump win the White House in November but the Grand Old Party may also pick up seats in the House and capture the Senate.
Democrats, particularly in vulnerable swing states, were worried that a tsunami of epic proportions would wash over the elections if President Joe Biden remained on the ticket. Now in the aftermath of the assassination attempt on Trump, even many Democrat strategists are saying winning may prove futile.
Yet, regardless of the political ramifications of the outcome, there are significant business and economic issues that are at stake in November. If Republicans controlled both the legislative and executive branches, not to mention having a fairly conservative majority on the Supreme Court, it could reshape how this country operates both here and abroad.
On the possibility of a rogue wave capsizing the status quo in Washington, here are three stocks to buy due to a Republican tsunami in November.
Kinder Morgan (KMI)
Expect the oil and gas industry to benefit from a Trump presidency. Although Biden promised to “end fossil fuels” while campaigning in 2020, production has actually grown during his administration, even exceeding that of Trump’s first administration. The U.S. Energy Information Administration says the U.S. today “produces more crude oil than any country, ever.”
Yet certain areas have been closed off to drilling, such as some 10 million acres in the Arctic National Wildlife Refuge. That could reopen under Trump. And while oil and gas giants like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) would undoubtedly benefit, as would oil industry services firms like Halliburton (NYSE:HAL), the real energy play is likely in the midstream sector. Transportation and storage facility operators would see increases in petroleum and natural gas flowing through their networks. Kinder Morgan International (NYSE:KMI) could be the biggest beneficiary.
The company is the largest energy infrastructure company in North America. It owns interests in or operates approximately 84,000 miles of pipelines and approximately 180 terminals. Kinder Morgan stock is also cheap.
Despite rising 15% in 2024 KMI stock still trades at 16 times next year’s earnings and a deeply discounted 10x free cash flow (FCF). Although Wall Street currently forecasts long-term earnings growth of just 5% annually, a Republican sweep could set up Kinder Morgan for dramatic margin expansion.
Elbit Systems (ESLT)
Border security will also be a primary focus of a Republican-controlled government. A staggering 10 million illegal immigrants have entered the U.S. during Biden’s administration. Southern border crossings have doubled since 2021 while northern border crossings are up 1,240%, according to the House Committee on Homeland Security.
Securing the borders from further infiltration by finishing the wall will undoubtedly be a top priority. U.S. taxpayers, and not Mexico, will pay for it but companies will see contracts flowing to construct it. Companies like Vulcan Materials (NYSE:VMC),which is the country’s largest producer of construction aggregates, could participate in border wall construction.
Yet technology solutions will likely play a bigger role than just physical barriers. Deploying radar, LiDAR, sensors and other technology would complement a wall. Elbit Systems (NASDAQ:ESLT) could gain as its systems are used by Israel along the West Bank. It has also provided virtual security along the U.S. southern border as well.
Elbit installs and maintains integrated fixed tower systems. According to the company, its persistent border security system “provides real-time regional surveillance, early warning, targeting and border-patrol mission management.”
Elbit Systems stock is down 11% in 2024 but at less than twice sales, it could rapidly melt up in the event of a Republican tsunami.
UnitedHealth Group (UNH)
Health insurance and managed care provider UnitedHealth Group (NYSE:UNH) could also benefit from a Trump presidency. A focus on reduced regulation and improved reimbursement schedules under the Medicare Advantage program are just some ways a streamlined bureaucracy would lift UnitedHealth.
The insurer ended 2023 with 7.7 million people covered by its Medicare Advantage policies. In the past, the Centers for Medicare & Medicaid Services (CMS) has reduced or frozen reimbursements. Premium revenue from CMS represented 40% of UnitedHealth Group’s revenue last year.
UNH stock dropped to a two-year low earlier this year on less-than-expected increases in the Medicare Advantage program. Because they were experiencing already high but still rising medical costs, the lower rates mean insurers can’t charge as much for monthly premiums and plan benefits.
UnitedHealth jumped 5% after the presidential debate at the end of June which was largely seen as disastrous for Biden. The stock is down 3% for the year. With the insurer trading at less than twice sales and going for 16 times earnings estimates, it should see significant growth with a Republican win in November.
On the date of publication, Rich Duprey held a LONG position in XOM and CVX stock. 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.
