Presidential elections in the USA are due in less than a month. We can study the election agendas of the candidates and try to forecast the growth of certain stocks or a whole economic sector in case this or that candidate wins.
In this article, we will discuss the companies the profit of which may increase if Joseph Biden wins.
Why did I choose Biden?
Pools show that Biden is currently the leading candidate. 51.6% of the electorate are ready to vote for him, while Donald Trump is supported by 42.4%.
However, in the USA, the winner is defined not by the choice of the electorate but by the decision of the electoral college. For example, in 2016, Donald Trump won over Hillary Clinton, taking 304 votes of the college against 227 votes; meanwhile, he was supported by 62.9 million of voters, and Clinton – by 65.8 million.
There are 538 electors in the USA, and 279 of them are ready to vote for Bide, according to a poll, which is more than 50%. Naturally, the situation may change, but for now, it is more or less stable. Let us now have a look at those who might make a profit from Biden’s victory.
Biden wins – taxes grow
First, let us mention a detail that is obviously uncomfortable for business. In case Biden wins, he plans to increase taxation of corporations and the wealthy. However, taxes will still be lower than before Trump came. The latter managed to decrease significantly the tax load imposed by Obama, that is why Biden’s slight increase does not look that scary.
How will the tax increase affect investors?
Firstly, an increase in taxes will decrease the revenue of companies, which will directly affect dividend payments. Next, the share repurchase volume will shrink, which may influence the stock price and the speed of its growth.
Also, a tax on capital gains, including those from dividends, will be introduced. This might provoke an instant reaction of shareholders in the form of increased dividend payments right before Biden’s inauguration, i.e. when it will become clear he has won.
Of course, the profit from the increased taxes will go to the US budget. The sum is supposed to reach 2.8 trillion USD in 10 years; the money can be spent on infrastructure and social programs. This is not so interesting for us because we do not see the final beneficiaries clearly.
A thaw between the US and China
Now to the good news. An important part of Biden’s program is the fact that he has never been aggressive to China. The trade war may lose the edge, which will be good for both countries. One of the companies that will win from the thaw will be Apple (NASDAQ: AAPL).
Trump disapproves of certain American companies having their producing powers in China, i.e. creating workplaces outside the USA. Moreover, he signed a document banning the use of Chinese apps, including WeChat.
Ban on WeChat
WeChat is actively used by Chinese users not only as a messenger but also as a payment instrument. Due to the ban, Apple cannot offer the app in the Store worldwide, and WeChat transactions will be blocked. This may drop the sales of the iPhone, including in China.
Biden’s victory will support the company. Hence, Apple stock will remain attractive for long-term investors (they have almost always been, though).
Now to the key event that may influence the income of many companies if Biden wins.
In times of Barak Obama, a decrease in carbon emission was top-priority; the country turned to renewable energy sources to preserve nature for future generations. The States cared for the environment. Trump did not support Obama’s views. He aimed at reaching energy independence based on fossil fuels. As a result, Trump’s administration abolished 64 ecological rules and 34 more are in the process of abolishing. He permitted hole-making for gas and oil even in national parks.
Trump and his administration do not believe the words of scientists who state that carbon emission will have catastrophic consequences for the planet. In the end, the USA became the only industrial country to leave the Paris Agreement on climate. This way Trump supported those who work in the gas and oil sphere. Now the USA is trying to block the North Stream 2 in Europe to sell the gas they produce.
This situation reminds the one with Remdisivir. After it was fast approved by the FDA, the USA bought out almost all the drug in the world plus 90% of the additional volume that will be produced in two months. When Trump got sick, he had to take the drug to justify the purchase. However, the World Health Organization published an article where it proved Remdisivir was poorly efficient against the Covid-19.
Let us draw a conclusion. Trump did not directly support the development of renewable energy sources. On the contrary, Biden plans to protect the environment. He has placed an ambitious goal to reduce the emission of greenhouse gases to zero by 2050.
This means that if Biden wins, companies working with renewable energy sources will also win.
Investments in energy companies feature low risks
Investments in electric power companies are considered conservative: regardless of how good or bad the US economy works, electric energy will always be in demand.
Building and servicing electric power plants is really expensive. That is why the government approves the monopoly of such companies in certain regions. The business of such companies is regulated through fees that the company takes from its clients, only the size of the fee is decided upon by the government. As a result, such companies generate a stable and predictable income. Also, they pay stable dividends that increase with enviable frequency.
The largest energy company in the US working in the sphere of renewable energy sources is NextEra Energy (NYSE: NEE). Hence, it is the beneficiary that wins in the case of Biden’s victory.
NextEra Energy is the leading company in the sphere of clean energy. It generates 45,900 megawatts of electric power and manages such subsidiaries as Florida Power & Light, NextEra Energy Resources, NextEra Energy Partners, and NextEra Energy Services.
NextEra Energy is the leader in the US market and has one of the highest credit ratings among energy companies. Its financial flexibility allows investing in the construction of new objects producing clean energy.
According to the forecasts of its director-general James L. Robo, in 2022 and 2023, the company’s profit will grow by 6-8% annually. However, he also called this forecast conservative and voiced a hope that the company might perform better.
Technological development let NextEra Energy decrease the prime cost of electric power. In the future, the company expects storage batteries to feature larger capacity and increase the time of power storage, which is another way of decreasing the prime cost of energy.
The optimism of investors concerning the future of the company is very well visible in the speedy growth of its stock prices. However, now is not the best time for investing in NextEra Energy – look at the tech analysis.
NewEra Energy tech analysis
Well, the stock price is trading above the 200-days Moving Average, which indicates an uptrend. However, the price always moves in a certain structure: first, it grows, then corrects, then grows again, then corrects, and goes on this way until the trend is over.
Judging by the previous chart data, when the distance between the price and the MA reaches 55 USD, the quotations start correcting.
Currently, the price is already 50 USD away from the MA. This promises a correction that may either make the price drop or go on trading is a certain range (horizontal correction).
NextEra Energy is quite a strong company, both financially and in the competition. That is why those who want to make a profit on the falling of its stocks are few. However, the very fact of a soon correction made several investors play short. See the Short Float data: last week, it was 0.25, while now, it has reached 1.15. Anyway, this is a very low value.
Hence, if you plan to invest in this company, wait a week or two.
NextEra Energy is good for long-term investments regardless of who wins the election. However, Biden’s victory will support the company’s development in the future and positively influence the stock price.
Biden’s care for the environment will have a good influence on all companies working with renewable energy sources and give an impulse to the development of electric cars, which might show in additional subsidies to those who buy them. Thus, the producers of electric cars will remain in the focus of investors.