As mentioned last week, I see volatility at play in the market for the foreseeable future. Investors remain focused on stimulus talks and earnings reports. Still, even in the middle of the market’s seesawing, I see a way for investors to take advantage of the election, no matter who wins.
The market appeared to start the week on a positive note, and yet it looks like it will finish this week at a loss. It seems it lacks clear direction due to uncertainty in the election, no apparent movement on a stimulus plan, and an uptick in COVID-19 cases.
The White House and Democratic leaders are working on the $2 trillion coronavirus relief bill, but the Senate appears unwilling to move on the bill until the election is over. Investors view the stimulus package as crucial to helping the economy recover.
Volatility is also a byproduct of mixed earnings results that have flowed in so far. Both American Express (AXP) and Intel (INTC) reported poor financial results for the quarter. AXP missed profits, and INTC reported a loss on earnings and revenue. On a more positive note, Capital One (COF) saw its profit and revenue rose in the quarter, and over 80% of companies have beat analyst forecasts so far.
I see this volatility continuing until after the election results have been finalized and there is some clarity on the stimulus plan. I also see COVID-19 cases rising through the fall and winter, which, while helping the stocks I recommended last week, will harm the economy and create more uncertainty.
While the FDA recently approved Gilead Sciences (GILD) COVID treatment remdesivir, I don’t see this as moving the needle too much, as the treatment had already been used on patients. Pfizer (PFE), the leading vaccine candidate, doesn’t expect to even file for approval until the end of November or December. This uncertainty will continue to drive volatility for some time.
Even with all this volatility, I do see a way for investors to profit from stocks. And that is to invest in companies that should benefit from either a second term for President Trump or a win for former Vice President Joe Biden. These are stocks rising on trends that are not affected by Biden or Trump’s policies.
Here are the three stocks that should continue to shine before and after the election.
Lockheed Martin (LMT)
The first stock on the list is LMT. The defense sector should see continued spending under either presidency. While Republicans are typically considered more favorable to defense spending, both parties have shown they are willing to spend on the defense of our nation in recent history.
As LMT gets the majority of its revenue from the U.S. government, that shouldn’t change anytime soon. The company is one of the world’s biggest defense contractors, and its stock is up 71% over the last five years. The company, which has been immune to the pandemic, increased its dividend payout this year to 8.3% and sanctioned a stock buyback program worth $1.3 billion. The company reported its latest financial results on October 20th and beat expectations on both revenue and earnings.
United Rentals (URI)
The next stock on this list is URI, which is the world’s largest equipment rental company. Both presidential candidates are likely to invest in infrastructure, including construction projects to build roads, bridges, and 5G cell towers. Construction sites typically require rental equipment, which URI provides.
This stock consists of two main segments, general rentals and trench, and power and fluid solutions. The general rentals and trench unit rents out construction and industrial equipment, including tools and services for construction companies. The second unit provides everything from trench shields and construction lasers, to HVAC and generators. This rental company is as poised as any to benefit from infrastructure spending. The stock is up over 67% over the last two years. The company is expected to report earnings next week on October 28th.
The stock is rated a “Buy” in our POWR Ratings system with a grade of “A” in Trade Grade. It is also the #1 ranked stock in the Industrial – Services industry.
Abbott Laboratories (ABT)
The final stock on my list is ABT, which manufactures and markets medical equipment. The company created the 15-minute COVID test that we keep hearing about. It announced that the FDA granted it emergency use authorization on September 16th. As the pandemic is likely to continue into next year, regardless of who wins office, this stock wins either way.
The test, which is called the BinaxNow COVID-19 Ag Card rapid test, does not need equipment to process samples or read the results. It tests for antigens that can detect specific proteins that are part of the virus. The test costs only $5.00 per unit and is less invasive than traditional swab tests. ABT also created an app that shows people their results. The test represents a massive revenue opportunity for the company. ABT reported earnings this week and beat estimates on both revenue and earnings.
The stock is rated a “Strong Buy” in our POWR Ratings system. It holds grades of “A” in three out of the four components that make up the POWR Ratings and is also the #1 ranked stock in the Medical – Pharmaceuticals industry.
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SPY shares fell $0.42 (-0.12%) in after-hours trading Friday. Year-to-date, SPY has gained 8.97%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More…
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