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Make the Most of US Election Day With These 4 Stocks

Tirthankar Chakraborty
·6 min read

Americans will cast their votes on Nov 3, ending the head-to-head between Donald Trump and Joe Biden. But this election is quite different with the coronavirus pandemic ravaging the economy and roiling the markets.

The election results will likely determine the future course of action to tackle the pandemic as well as throw light on possible government outlays, trade policies and regulations on taxes, to name a few.

Notably, both candidates do have contrasting views on pressing concerns like climate change, civil liberties and healthcare issues. While for Biden it’s all about the “soul of America,” Trump no doubt has been a formidable voice when it comes to international policies.

Biden, in the meantime, has been constantly backing a clean energy revolution. His $2-trillion climate plan should pep up alternative energy companies. A Democratic sweep also means that there will be huge infrastructure spending.

But it’s worth pointing out that spending on infrastructure projects actually create a visible reminder to citizens that the government is spending to address a larger crisis. It’s, thus, imperative to see whether such infrastructure outlays are better than other forms of fiscal stimulus measures. Having said that, the Biden administration has promised to provide a massive coronavirus relief package to stimulate the economy.

The Biden administration, by the way, is widely expected to de-escalate the U.S.-China trade tensions and benefit companies that predominantly rely on exports. At the same time, a blue wave would lead to decriminalization of marijuana at the federal level, something that should bode well for cannabis producers.

But a Biden administration could be a nightmare for lenders. Banks, in particular, could face higher corporate taxes under a Biden administration compared to a second Trump term. A friendlier tax structure can also be expected for traditional energy players, provided President Trump is re-elected.

Now, both parties are expected to insert regulatory pressure on tech giants but it’s true that the Trump administration is expected to take a softer stance. A Trump win should buoy aerospace and defense, as he seeks to spend more on defense systems. A Republican win is also expected to provide the much-needed relief to the highly-regulated pharma and biotech industry.

However, do we have a clear winner heading into the election day? At this juncture, it’s a highly-contested election and the outcome may not be decided immediately. In fact, it may well take several weeks. Interestingly, Biden may be slightly ahead of Trump in recent opinion polls but we all know how misleading these polls are, as evident from the last election outcome.

Thus, from an investment standpoint, it’s quite nerve-racking to pick stocks as you don’t know who will win and what kind of policies might get implemented. But one thing is for sure, that no matter who wins, additional stimulus measures will certainly be on both parties’ agenda. Once these get pushed, the stock market will get a new lease of life, brushing aside the back-to-back monthly decline.

What’s more, traditionally, the presidential election outcome has been inconsequential for the stock market. For instance, the Dow has increased an average 3.8% annually after a Democrat is elected in the White House since 1900, while the blue-chip index gained 1.1% under Republicans, per Ed Clissold, chief U.S. Strategist for Ned Davis Research, as quoted in a CNBC article.

It’s time to invest in value stocks because these stocks are now under-priced, thanks to market volatility over the last two months. However, post-election, these stocks will capitalize on the steady uptick in the broader market as they do have solid underlying fundamentals. Moreover, investors can buy these stocks now at bargain prices (read more: Value to Outperform Growth Post Election: 5 Stocks to Buy Now).

4 Solid Choices

Thanks to our new style score system, we have been able to identify four value stocks. Our research shows that stocks with a Value Score of A or B when combined a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investing space.

Ally Financial Inc. ALLY is a diversified financial services company. The company currently has a Zacks Rank #1 and a Value Score of A. Ally Financial has a price-to-earnings ratio (P/E) of 11.43, compared with 12.8 for the industry. The company’s expected earnings growth rate for the current and next quarter is 5.3% and 302.3%, respectively.

Koppers Holdings Inc. KOP provides treated wood products, wood treatment chemicals, and carbon compounds. The company currently has a Zacks Rank #2 and a Value Score of A. Koppers has a price-to-earnings ratio (P/E) of 5.84, compared with 11.8 for the industry. The company’s expected earnings growth rate for the current and next year is 16% and 11.2%, respectively.

The Kroger Co. KR operates in the thin-margin grocery industry. The company currently has a Zacks Rank #1 and a Value Score of A. Koppers has a price-to-earnings ratio (P/E) of 9.81, compared with 16.2 for the industry. The company’s expected earnings growth rate for the current year is 49.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Holly Energy Partners, L.P. HEP owns and operates petroleum product and crude pipelines, storage tanks, and refinery processing units. The company currently has a Zacks Rank #2 and a Value Score of B. Holly Energy Partners has a price-to-earnings ratio (P/E) of 6.03, compared with 10.7 for the industry. The company’s expected earnings growth rate for the next quarter and year is 11.6% and 5.8%, respectively.

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The Kroger Co. (KR) : Free Stock Analysis Report
Holly Energy Partners, L.P. (HEP) : Free Stock Analysis Report
Koppers Holdings Inc. (KOP) : Free Stock Analysis Report
Ally Financial Inc. (ALLY) : Free Stock Analysis Report
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