The stock to buy with a Republican win in 2016: Strategist
As the Republican presidential candidates expound on their plans for America, investors want to know where they should put their money if the GOP takes back the White House in 2017.
Though slowly whittling down, there are still 14 major Republican candidates (plus scores of minor candidates) seeking the government’s top job.
One of the bigger topics out there is the future of Social Security. Some $870 million in payments will be made to over 59 million recipients in 2015, meaning there are 2.5 workers for every recipient, given that the participation rate of 62.4% is among the lowest in four decades. According to the agency’s own numbers, Social Security will be insolvent in the next couple of decades.
And while both parties have proposed reforms over the years, few politicians want to be holding that political football when confronted by the opposing team’s linebackers of special interests.
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In 2005, then-president George W. Bush proposed voluntary retirement accounts for younger workers. But he took a hit in his poll numbers as politicians began debating the proposal, and it went nowhere.
But what if the GOP were to win the presidency in 2016 and gain enough support in Congress to revive private retirement accounts? According to Erin Gibbs, equity chief investment officer at S&P’s Investment Advisory Services, there’s at least one stock that could be a winner.
“One of our favorites is T. Rowe Price (TROW),” said Gibbs, who is responsible for more than $16 billion in assets under advisory. “They're one of the largest asset managers in the United States.”
Gibbs finds the stock’s current 2.9% dividend yield attractive and sees room for growth in the stock, particularly because it is trading at 16.5 times its estimated forward earnings.
“Their forward price earnings ratio is actually trading at a bit of a discount particularly to their 3-year average,” she said, adding that it traded close to 20 times forward earnings just a couple of years ago.
“We feel this is a good opportunity to get in,” said Gibbs. “Even if we don't see major changes in Social Security, we still see this is a great opportunity.”
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