As we edge closer to another election year, the impending battle between President Biden and former President Trump looms large on the horizon. It’s paramount for investors to strategize well in advance of the election for potential outcomes. If the Democrats were to secure another term in office, which stocks should you have in your corner of the market? Let’s delve into the companies and sectors poised to thrive under Biden’s policies and the Democratic agenda for the economy.
A Rundown of Potential Stocks in a Democrat-Friendly Market
In anticipation of a potential Democratic win, here’s a shortlist of seven stocks worth considering for inclusion in your investment portfolio. These picks are not politically motivated but are based on sound predictions regarding where the economy might be heading under the Democrats’ leadership. We will analyze stocks set to benefit from sustained government investment in infrastructure and climate initiatives.
Tesla (TSLA)
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If you’ve been following Tesla (NASDAQ:TSLA) for a while, you might have found the company’s most recent earnings report rather disheartening. Revenue fell short of estimates, and quarterly net profits saw a decline due to production and delivery setbacks. Nonetheless, it seems that many investors have grown unduly pessimistic about Tesla’s future prospects.
In the colossal U.S. auto market, electric vehicle (EV) adoption remains at a meager 1%, leaving Tesla with ample room for long-term growth. Despite current challenges such as rising interest rates and increased competition, when macro conditions improve, a surge in demand for Tesla vehicles is likely. Moreover, under $200 per share, acquiring TSLA stock seems like a steal. Tesla, being at the helm of the sustainability revolution, continues to hold sway with its brand strength, integrated structure, and expertise in software/AI that could pave the way for a more lucrative autonomous ride-hailing network.
Furthermore, with the Democrats favoring EVs and clean energy incentives, a Democrat back in office in 2024 could serve as a substantial policy tailwind for Tesla. Betting against Tesla has proved futile time and again. Investors with a long-term outlook stand to reap handsome rewards by securing TSLA stocks at their current undervalued prices.
First Solar (FSLR)
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Similar to Tesla, First Solar (NASDAQ:FSLR) has grappled with demand constraints amid rising interest rates and a challenging macro environment, with its stock plummeting over 32% from its highs. Despite this setback, it presents a compelling buying opportunity within the solar stock realm.
Democratic administrations have historically been proponents of renewable energy, placing solar and wind at the forefront of their clean energy initiatives. A return to a Democratic presidency in 2024 could see a significant boost in solar adoption due to expansive climate incentives. Additionally, ongoing cost efficiencies will continue to drive the increasing cost-competitiveness of solar for both residential and commercial applications.
First Solar’s robust revenue growth of 27.4% in the third quarter, coupled with a projected 33% revenue growth for 2023, presents an optimistic outlook. With an impressive 33.5% net profit margin, partly attributable to government solar subsidies, this environment of subsidies is not expected to dissipate soon. FSLR stock, with a forward price-earnings ratio of 12-times based on 2024 earnings estimates, appears to be a bargain relative to its earnings growth potential.
Enphase Energy (ENPH)
Renewable Energy and Defense Sectors Weather Uncertain Markets
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Enphase Energy (NASDAQ:ENPH) is an American energy tech innovator specializing in advanced solar solutions like microinverters. The company’s systems are gaining ground by maximizing solar efficiency in residential and commercial markets.
Like its peers, Enphase faces demand uncertainty in today’s macro environment. Its stock slid 60% from peak levels as part of the broader selloff in equities and higher-multiple tech names. Yet, with ENPH stock having cratered, the company’s risk/reward now looks far more positively-skewed.
Assuming Democrats regain power in 2024, Enphase is set to benefit enormously, given the Biden administration’s generous stance toward renewable energy credits and incentives. Even more impactful could be the passage of a nationwide clean electricity standard accelerating the shift from fossil fuels. Regardless of policy shifts, U.S. solar capacity will likely increase by 38% this year.
Enphase aims to keep gross margins near 40% in 2024 while reversing its sales downturn. Its systems will be integral as more households, businesses, and utilities adopt solar plus storage solutions. Enphase’s depressed valuation prices in an overly bearish future. Thus, I think this beaten-down clean energy stock appears primed for upside once growth visibility improves.
ChargePoint (CHPT)
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ChargePoint (NYSE:CHPT) has not had the prettiest stock chart recently. This EV charging company still operates at a loss and relies heavily on government funding to finance growth. This has led to dilution for current shareholders, and a stock price that has plummeted nearly 96% from its 2021 peak.
However, the pace of decline has slowed recently, after a very tough 2022/2023. CHPT stock has been trading relatively flat since last November, and I don’t anticipate it breaking below the $2 level soon, barring an economic black swan. With $367 million in cash reserves available today, ChargePoint should have enough capital to finance operations for a couple of quarters without requiring further dilution.
More government stimulus could prove to be the catalyst that kicks ChargePoint’s growth into overdrive. Just last month, we got word of $623 million in new federal grants for EV charging networks. Consider that a drop in the bucket relative to what’s truly needed to build nationwide infrastructure for mass EV adoption. If the Democrats retain the White House, expect billions more to flow into this still-nascent industry. ChargePoint’s first-mover status in EV charging could pay off in a big way.
This stock might look ugly today, but future prospects remain bright if infrastructure spending keeps growing under president Biden.
General Dynamics (GD)
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Alongside the clean energy and EV sectors, the Biden administration has nurtured another sector – defense. Regional wars and geopolitical tensions have escalated over the past two years, with no signs of cooling anytime soon. The U.S. has flooded battlefield allies with American-made weapons and vehicles. A Democrat victory would likely perpetuate this foreign policy agenda and sustain the torrent of money flowing into the military-industrial complex.
That bodes especially well for General Dynamics (NYSE:GD). This defense giant manufactures cutting-edge ships, combat vehicles, weapons systems, and information technology for the Pentagon and allies abroad. General Dynamics’ revenue nudged up 7.5% in the fourth quarter of 2023, while operating profit saw a 5% bump. However, the G700 Gulfstream business jet certification delays did create a slight drag on its results. The company still churned out $3.8 billion in free
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General Dynamics (NYSE:GD) concluded cash flow for the full year 2023, achieving a remarkable 115% cash conversion rate. The delay in G700 deliveries is expected to shift to 2024, further propelling the company’s earnings growth. Additionally, General Dynamics witnessed an expansion of its backlog to a substantial $93.6 billion.
General Dynamics (GD)
General Dynamics (NYSE:GD) demonstrated its financial prowess by paying out $1.4 billion in dividends in the last quarter alone and anticipates a further $4 billion in share buybacks in the upcoming fiscal year. The company also utilized $434 million of its cash to repurchase shares, concluding 2023 with $1.9 billion in cash and cash equivalents. Despite the fluctuations, GD stock offers attractive value, combined with a secure 1.96% dividend yield. It appears that this defense behemoth remains resilient, regardless of the prevailing political landscape.
Lockheed Martin (LMT)
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Lockheed Martin (NYSE:LMT) is a key player in producing some of the most sophisticated aircraft weaponry globally, from stealthy F-35 fighters to missile defense systems. With the escalation of military tensions worldwide, defense spending has surged across Eastern Europe, Asia, and the Middle East, directly benefiting Lockheed. Despite a slight decline in FY23 revenue and earnings due to one-time impacts, Lockheed achieved a record-high $160.6 billion backlog last quarter, with free cash flow nudging up to $1.66 billion.
The company has consistently directed a significant portion of its resources back to its shareholders, demonstrating confidence amid larger economic uncertainties. Last year, Lockheed distributed $9.1 billion to shareholders through dividends and buybacks. The stock is currently trading at reasonable valuations relative to its historical norms. Anticipate expanded production of its stealthy F-35 and increased demand for tactical missiles like the Hellfire and Javelin. With geopolitical crises persisting, Lockheed Martin holds the promise of robust and consistent growth, independent of election outcomes.
Pfizer (PFE)
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Pfizer (NYSE:PFE) has experienced a significant pullback from its peak, declining over 54% from its highs post the pandemic. Despite this, the company remains a dominant force in the healthcare sector. Excluding pandemic-related products, Pfizer delivered a solid 7% year-over-year operational sales growth in 2023. As revenue from Covid-19 vaccines wanes, Pfizer’s core pharmaceutical business displays enduring strength, supported by new product launches.
Management has forecasted an additional 6%-8% operational sales expansion in 2024, accompanied by around 11% adjusted earnings per share growth. With its sturdy pipeline and diversified portfolio, Pfizer’s current valuation seems quite enticing, trading at just 12-times forward earnings estimates – a historically favorable metric.
The increasing free cash flow positions Pfizer to continue its generous capital return programs, offering investors a 6% dividend yield, alongside sustained buybacks. For investors with a long-term outlook, PFE stock presents a promising growth trajectory.
On the date of publication, Omor Ibne Ehsan 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.
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