Many investors confuse volatility in an election year with the market performance during an election year. Historically, investors don’t care all that much who wins the election.
Historical evidence shows that the market will rise after a Republican wins and dip after a Democrat wins. But that same evidence suggests that those trends flip in the first year of a presidency. It just proves that there’s a difference between campaigning and governing.
What can be different is where investors choose to make their money. Certain sectors perform better under a Republican administration than a Democrat administration. But that’s not the focus of this presentation.
Rather, we’re taking a look at companies and stocks that should profit no matter who occupies 1600 Pennsylvania Avenue. Some of these will be familiar names, but we’re trying not to be too obvious. Amazon (NASDAQ:AMZN) is a buy no matter who wins. You don’t need an article to tell you that.
And while I wouldn’t call this a list of “coronavirus stocks,” the list has some resemblance. The fact is every major event in our nation’s history has a ripple effect. And technologies that we never imagined would become “a thing” become the most important thing in our lives.
Quick Links
- Shopify
- PayPal
- Microsoft
- DocuSign
- HCA Healthcare
- CVS Health
- Smith & Wesson
#1 - Shopify (NYSE:SHOP)
The first company I want to look at is Shopify (NYSE:SHOP). Yes, I said I wasn’t going to be obvious with a name like Amazon, but e-commerce is a trend that’s too big to ignore and will continue into 2021 and beyond. Shopify is well-positioned to grab market share.
Shopify has managed to carve out a niche for itself as an e-commerce platform for small to midsize retailers who may feel underserved by Amazon. The company provides all the tools businesses need to set up and run an online store.
And investors will appreciate the growth. Since the company’s initial public offering (IPO) in 2015, SHOP stock has climbed over 4,000%. Recent partnerships with Pinterest (NYSE:PINS), Walmart (NYSE:WMT) and Chipotle Mexican Grill (NYSE:CMG) will add to the company’s growth.
The Covid-19 pandemic has underscored the importance of an e-commerce presence. This makes it highly likely that Shopify will continue to add customers as retailers understand that an online presence is now a matter of survival.
About Shopify
Shopify Inc, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, Australia, China, and Latin America. The company's platform enables merchants to displays, manages, markets, and sells its products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons, and marketplaces; and enables to manage products and inventory, process orders and payments, fulfill and ship orders, new buyers and build customer relationships, source products, leverage analytics and reporting, manage cash, payments and transactions, and access financing.
Read More - Current Price
- $103.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 16 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $94.95 (8.7% Downside)
#2 - PayPal (NASDAQ:PYPL)
During the pandemic more businesses and consumers turned to digital payment processors like PayPal (NASDAQ:PYPL) to conduct business. This is honestly one of the big bank’s worst nightmares because for those who use PayPal, it’s becoming a lot closer to a full-service bank than some may realize. Technology is catching up, but PayPal is managing thus far to stay one step ahead.
One way the company is doing this can be seen its acquisition of the shopping and awards platform, Honey. The $4 billion acquisition was PayPal’s largest ever, but it looks to pay off in a key way. For the first time, PayPal can be part of the customer’s complete purchase journey instead of being simply the way to pay for it at checkout.
PayPal may be an ideal stock to own if we are indeed moving closer to a cashless society. When PayPal reported earnings in May, the company said their user base was up over 20% on a year-over-year basis.
About PayPal
PayPal Holdings, Inc operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers that enables its customers to connect, transact, and send and receive payments through online and in person, as well as transfer and withdraw funds using various funding sources, such as bank accounts, PayPal or Venmo account balance, PayPal and Venmo branded credit products comprising its installment products, credit and debit cards, and cryptocurrencies, as well as other stored value products, including gift cards and eligible rewards.
Read More - Current Price
- $84.74
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $83.45 (1.5% Downside)
#3 - Microsoft (NASDAQ:MSFT)
I’m allowing myself one big name here, but Microsoft (NASDAQ:MSFT) has two catalysts that are too big to ignore. First, the pandemic has led to the adoption of Microsoft Teams. This is an alternative to Slack (NYSE:WORK) and other workplace productivity tools. Teams is geared more for the enterprise level, but with many companies still contemplating the extent of their remote work plans, Microsoft looks to be a winner.
And the company is getting ready to launch a new version of its popular Xbox gaming console. That will pull in sales from the gaming community, which by the way has been red hot in this pandemic.
Microsoft is not without its headwinds. There is mounting evidence that traders are closing positions with the expectation that Microsoft will back off from its bid to buy TikTok. But that may work to the benefit of opportunistic investors. The stock is widely thought of as being near a top. Shaving a few dollars off the share price should make for a nice buy-on-the-dip opportunity.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $415.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $503.03 (21.1% Upside)
#4 - DocuSign (NASDAQ:DOCU)
Another emerging trend is remote document signing. There are certain trends that make you wonder why this was ever not the normal way of doing things. That’s the case with DocuSign (NASDAQ:DOCU). Many things like mortgage documents, lease forms, health forms, and more that often required a face-to-face meeting and several minutes of tedious signing can now be handled quickly, and more importantly remotely.
And the simple reality is that we’re not going backwards. Once you’ve used the technology, you realize how simple it is and you won’t see any reason to go back to the old way. And DocuSign is not just a trend that emerged since the novel coronavirus arrived. The current generations that will be leading DocuSign’s growth are looking to have a big social media presence while avoiding actual human contact as much as possible. That’s terrible for society. It’s great for DocuSign.
And don’t be too concerned about DocuSign not being profitable yet. The company’s sales grew by 14% in the last quarter. This didn’t yet factor in the effect of the novel coronavirus. The company is also generating positive free cash flow. Analysts are projecting the company’s profitability may exceed 58% annually over the next five years.
About DocuSign
DocuSign, Inc provides electronic signature solution in the United States and internationally. The company provides e-signature solution that enables sending and signing of agreements on various devices; Contract Lifecycle Management (CLM), which automates workflows across the entire agreement process; Document Generation streamlines the process of generating new, custom agreements; and Gen for Salesforce, which allows sales representatives to automatically generate agreements with a few clicks from within Salesforce.
Read More - Current Price
- $78.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $63.40 (19.6% Downside)
#5 - HCA Healthcare (NYSE:HCA)
No matter what party wins the election, healthcare will remain a hot button topic for the country. And as a company that is a for-profit operate of healthcare facilities, HCA Healthcare (NYSE:HCA) is a solid agnostic choice.
To be fair, HCA stock is down over 10% for the year. However, the stock was hit disproportionately hard in the March selloff, dropping over 50%. From that low, the stock is up nearly 100%, and nearly 40% in the last month alone. The company benefits from having patients receiving care in hospital settings. That was obviously not taking place for much of the spring.
And while there has been some improvement, volume is not likely to return to anything approaching normal until the pandemic ends. But when it does, the company should benefit from patients who will be scheduling outpatient procedures that they’ve been putting off.
Bears will point out that the company’s positive earnings report in July was impacted by stimulus money. But HCA has been a solid long-term stock. Over the past five years, HCA has seen its revenue grow by 7% compounded annually. Core earnings growth has been even better at an 11% compound annual growth rate (CAGR). And going back to 2007, the company has posted a CAGR in core earnings of 16%.
About HCA Healthcare
HCA Healthcare, Inc, through its subsidiaries, owns and operates hospitals and related healthcare entities in the United States. It operates general and acute care hospitals that offers medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic, and emergency services; and outpatient services, such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology, and physical therapy.
Read More - Current Price
- $333.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $385.00 (15.6% Upside)
#6 - CVS Health (NYSE:CVS)
While other chains such as Rite-Aid (NYSE:RAD) are continuing to struggle, CVS Health (NYSE:CVS) looks like they’ve caught a bit of a tailwind. That is likely to remain in full effect as health and wellness will remain a major topic of discussion.
Like HCA, CVS stock is down over 10% for the year. But widening the lens to the last 12 months shows a stock that is up nearly 15%. And the stock is up over 20% since the pandemic began.
In the short term, CVS should get a lift from its Return Ready service. This will allow the company to open Covid-19 testing facilities in a workspace or college campus. It can also allow the company to perform valuable related services such as contact tracing or giving flu shots. And it’s not a leap of faith to imagine that CVS may be a partner in administering a vaccine should one become available.
From a macro level, CVS will not be hurt by the digital health movement. In fact, the company may be a beneficiary of customers becoming more comfortable using health care monitoring equipment at home.
About CVS Health
CVS Health Corporation provides health solutions in the United States. It operates through Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness segments. The Health Care Benefits segment offers traditional, voluntary, and consumer-directed health insurance products and related services.
Read More - Current Price
- $56.83
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $72.28 (27.2% Upside)
#7 - Smith & Wesson (NASDAQ:SWBI)
At the risk of depressing the audience, I would be remiss to not include a gun stock on this list. And with a gain of nearly 175% for the year, Smith & Wesson (NASDAQ:SWBI) fits the bill nicely.
Security has now moved beyond home security systems. Consumers, particularly those in major metropolitan cities, are paying attention to their personal security like never before. Ironically, this is no longer a partisan issue. It’s a safety issue.
What was once a category that was seen as a “Republican issue” that centered on a perceived lack of access has now become a personal safety issue. According to the Brookings Institute nearly three million more firearms have been purchased in the three months ending in June. And half of that increase was in June.
Not surprisingly SWBI stock is up nearly 175% for the year with virtually all of that gain occurring from the start of June until the present day. And while both Democrats and Republicans are purchasing guns, you can expect that the sector will receive increased attention as November draws closer.
About Smith & Wesson Brands
Smith & Wesson Brands, Inc designs, manufactures, and sells firearms worldwide. The company offers handguns, including revolvers and pistols; long guns, such as modern sporting rifles, bolt action rifles; handcuffs; suppressors; and other firearm-related products under the Smith & Wesson, M&P, and Gemtech brands.
Read More - Current Price
- $12.99
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $18.00 (38.6% Upside)
There is a difference between trading and investing. Making trades can be exciting and fun. You just have to be right a lot more than you’re wrong. Investing is a bit more boring, but it can help you stay calm during volatile times like the kind investors experience in every election year.
While its true elections have consequences, one of those consequences doesn’t have to be a drop in your portfolio. There are many stocks that are unaffected by the outcome of an election. Many of these are blue-chip stocks that offer investors a dividend in exchange for growth.
But there are some stocks that are poised for growth no matter which party occupies the White House. And those are the stocks to get in on now. Some of these stocks are having good years. Others are plodding along. However, all of these stocks look poised for growth no matter what the outcome of the election is.
And that means you can enjoy whatever this holiday season brings without trying to read the tea leaves of a new administration.
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