10 Best Stocks to Buy If Joe Biden Wins the Presidency
If Joe Biden emerges from the Nov. 3 election victorious, these 10 picks could be some of the best stocks to own under the new administration.
It's still early, and a lot can happen between now and November. But over the past few months, former Vice President Joe Biden's chances of becoming the next president of the United States have vastly improved.
As of late July, the betting markets were pricing in a 60% probability of the election going his way, and most polls show Biden ahead in the key swing states that will decide it.
Polls won't always nail it perfectly, as we saw four years ago when Hillary Clinton won the popular vote, but Donald Trump won the electoral college vote. And the COVID-10 pandemic gives us an entirely new set of variables. If voter turnout is low due to virus fears, it's anyone's guess to what the final tally will look like. But it's important to have an investing action plan in place for either scenario: a Trump re-election … or a potential Biden win.
"A Biden administration will mean more regulatory scrutiny for financial and energy stocks and probably higher taxes across the board," says Rodney Johnson, president of economic research firm HS Dent Publishing. "But there will be opportunities. Infrastructure spending, green energy and health care are all Democratic priorities and should do well under a Biden presidency."
Let's look at 10 of the best stocks to buy for a Joe Biden presidential victory. Some of these are fairly obvious winners, but some are contrarian bets you might not expect. Or, you can also learn more about the best stocks to buy if President Donald Trump wins re-election.
Data is as of Aug. 3. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
Brookfield Renewable Partners LP
- Market value: $8.0 billion
- Distribution yield: 3.9%*
We'll start with Brookfield Renewable Partners LP (BEP, $44.81), which owns a portfolio of wind, solar, hydroelectric and other green-energy properties.
While Biden is less focused on environmental issues than many of his Democratic peers, environmentalism and sustainability are a big part of his platform. From his campaign website:
"From coastal towns to rural farms to urban centers, climate change poses an existential threat – not just to our environment, but to our health, our communities, our national security, and our economic well-being. … Biden believes the Green New Deal is a crucial framework for meeting the climate challenges we face."
Biden might have to negotiate with a Republican Senate, and it's extremely unlikely he'd have a strong enough mandate to force through the Green New Deal in its entirety. In fact, "even if Biden wins the White House and Democrats lead Congress, the combined opposition from the party's moderate wing and from Republicans should make it difficult to push through transformational fiscal programs, such as the Green New Deal and Medicare for All," writes the Wells Fargo Investment Institute.
But it's still safe to assume that green energy and infrastructure will be a priority. That makes Brookfield Renewable Partners LP, the 60%-owned renewable-energy affiliate of Brookfield Asset Management (BAM), one of the best stocks to buy for a Joe Biden presidency.
The U.S. government isn't exactly going to write Brookfield a check. But a rising tide lifts all boats, and increased spending in this space is likely to boost Brookfield's bottom line.
* Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.
- Market value: $7.1 billion
- Dividend yield: N/A
A Democratic administration likely would benefit green projects. But it would likely be good for, ahem, the other kind of "green" project.
Democratic politicians take a more relaxed view toward marijuana and are more likely to support soft drug legalization. Joe Biden does not publicly support marijuana legalization at the federal level – or at least, not yet. But given his support for criminal justice reform that would include decriminalization for marijuana use, it's not hard to see him coming around to full legalization over the course of a four-year term. At the very least, a Biden administration would likely be a lot more lenient in criminal prosecution for marijuana-related crimes.
This brings us to Canopy Growth (CGC, $19.06). Canopy is a leader in recreational and medical marijuana products in the United States, Canada, Germany and the United Kingdom.
Like most marijuana stocks, Canopy became something of a bubble stock in 2018 and 2019. The pot bubble burst a little over a year ago, and the shares today trade for less than half their old highs.
We probably won't see a return to the bubble highs any time soon. But under a Biden presidency, don't be surprised if Canopy and other marijuana companies emerge as some of the best stocks across his term.
- Market value: $276.7 billion
- Dividend yield: N/A
Returning to the green-energy theme, Tesla (TSLA, $1,485.00) is a natural beneficiary of a Biden presidency.
One of Biden's stated objectives is to make the United States the leader in electric vehicle production and acceptance. And while Tesla isn't the only game in town for electric vehicles, it's clearly the largest and best-known pure play.
Of course, it's not like Tesla needs Joe Biden to generate interest in its cars. Tesla is doing more than fine under a distinctly non-green Trump administration. CEO Elon Musk generates more press than most presidents, and TSLA shares have been on fire. Even after a considerable pullback, shares are up 255% year-to-date, and Tesla is now the most valuable auto company in the world.
Is this an unsustainable bubble? It might be. But we have to say "might" because the shares have appeared to be expensive for years by traditional metrics and yet continued to run higher. So, regardless of who becomes the next president, you might want to tread carefully in Tesla stock. But a Biden administration would certainly push electric vehicles, and that can only help Tesla's bottom line.
- Market value: $13.2 billion
- Dividend yield: N/A
Like Tesla, Nikola is named after the famous inventor and pioneer in electricity Nikola Tesla. But before you write off Nikola as a cheap copy of Tesla, Nikola has a very different product line. Its primary product is 18-wheeler trucks. Nikola has models with pluggable batteries like Tesla, but it's better known for its hydrogen fuel cell-powered trucks.
The case for Nikola is straightforward enough. Prodding and subsidies from a Biden administration would likely encourage companies to upgrade their trucking fleets to electric models. This sector would have strong tailwinds at its back with a green-oriented Democrat in the White House.
But you might want to stop short of betting the farm. Nikola has a very short history as a public company, and it is nowhere near profitability at this stage of development. For better or worse, NKLA will be a bumpy ride no matter who's in office.
Martin Marietta Materials
- Market value: $13.0 billion
- Dividend yield: 1.1%
A key plank of Joe Biden's platform is his "Build Back Better" plan, which includes pledges to "mobilize American manufacturing" and "build a modern infrastructure."
Biden might have to negotiate with a Republican Senate, but he's unlikely to get a lot of pushback on these particular issues. Both parties at least pay lip service to the need for a manufacturing renaissance and for investments in infrastructure.
"Infrastructure improvement and supply-chain reshoring of health care goods and other items deemed critical to national security likely will be pushed either by a split government or one led by the Democrats," WFII analysts say.
This brings us to Martin Marietta Materials (MLM, $208.08).
Martin Marietta is a building materials company that specializes in the materials used in large construction projects. Among other things, it makes crushed sand and gravel products, ready-mixed concrete and asphalt, and paving products and services.
President Trump has expressed a desire to invest in infrastructure for most of his presidency, so it's likely Martin Marietta will do reasonably well however the election turns out. But a Biden win should help to speed the infrastructure spending along, making MLM one of the best stocks to buy for a new administration.
Energy Transfer LP
- Market value: $18.2 billion
- Distribution yield: 18.1%
You might have done a double take when you saw Energy Transfer LP (ET, $6.74) in the Biden list. Energy Transfer is a pipeline operator, after all, and a particularly controversial one. The company is currently embroiled in an ongoing dispute over its Dakota Access Pipeline, which passes close to the Standing Rock Reservation. Opposing the pipeline is a cause célèbre for environmental activists.
So, how can Energy Transfer be on a list with the likes of environmental darlings like Tesla?
It comes down to cash flow.
Under a Biden administration, it is safe to assume that new pipeline construction will slow to a crawl. The permitting process will become lengthier and more cumbersome.
"Given the election year, we believe that the regulatory environment would become more challenging under a Biden administration as he could require lengthy reviews to determine whether a project's economic value outweighs its impact to climate change," Stifel analysts write.
Paradoxically, this is good for many pipelines, particularly the large, established ones. Many operators have taken a growth-at-any-cost approach, looking to build empires irrespective of profitability. A world in which no new pipelines get built is a world in which serial empire builders like Energy Transfer have a lot more free cash on hand. Without the temptation to spend it on new projects, Energy Transfer might speed up its debt repayment efforts or even buy back shares.
We'll see. But in the meantime, in ET stock, you get a beaten-down pipeline giant with world-class assets and an 18% yield on a distribution that Energy Transfer has so far maintained through the recession.
- Market value: $287.9 billion
- Dividend yield: 1.7%
Joe Biden broke rank with many of his fellow Democrats by stopping short of promising "Medicare for all" or any sort of single-payer healthcare system. Instead, Biden has promised to provide a "Medicare-like" government option for health plans and to make private-sector plans more affordable and less complex.
We'll see how successful he is in that endeavor if he wins. The last several presidents certainly tried and failed to "fix" healthcare and it's still an expensive and complicated mess.
Regardless, a Biden win would be bullish for health insurers like UnitedHealth Group (UNH, $303.61). United Healthcare is particularly well placed because it specializes in Medicare supplemental plans. If Biden is successfully in providing a Medicare-type solution, there will be enormous demand for supplemental plans.
"With respect to Democrat Presidential Nominee Joe Biden's Medicare expansion proposal, (Avalere Health founder Dan Mendelson) estimates that nearly 23 million individuals would be newly eligible for Medicare," write Credit Suisse analysts.
Healthcare still is a political minefield, so be careful investing in the sector. But a Biden win could create a long runway for UNH.
- Market value: $20.4 billion
- Dividend yield: 4.7%
Real estate investment trusts (REITs) were an unintended casualty of the 2017 Tax Cuts and Jobs Act.
Trump's signature tax reform lowered the corporate tax rate from 35% to 21%, which was great for traditional corporations. But it made special tax shelters like REITs less attractive by comparison. REITs are not required to pay federal taxes so long as they distribute at least 90% of their profits as dividends.
Joe Biden's tax plan would raise corporate taxes back to 28% and would more aggressively tax foreign income. It also is specifically designed to force large, profitable tech companies to pay more.
All of this bodes poorly for the stock market. But it wouldn't be such a bad thing for REITs. Their special tax status might actually be appreciated again.
One REIT to consider is Realty Income (O, $59.41). Although Realty Income specializes in retail properties, most of its portfolio – pharmacies, dollar stores, convenience stores, big-box retailers – is relatively COVID-proof. It's a conservative REIT with a long track record of rewarding its shareholders. The company has paid 600 consecutive monthly dividends and has actually raised its dividend for 91 consecutive quarters.
Shares are down by more than 25% from their recent highs, which has elevated the yield well north of 4%. A combination of receding COVID fears and a stricter tax regime might be just the right mix to send shares even higher.
iShares Core MSCI Emerging Markets ETF
- Assets under management: $53.3 billion
- Dividend yield: 3.1%
- Expenses: 0.13%
Emerging markets (EMs) as a group weren't exactly killing it before the COVID-19 pandemic turned the world upside down. The iShares MSCI Emerging Markets ETF (EEM) has never recovered to its pre-2008 highs, and the ETF has been stuck in a trading range for the past 10 years despite being historically cheap compared to U.S. equities.
The underperformance of emerging markets stocks isn't a total mystery. Stale commodity prices and a massive corruption scandal have effectively knocked Latin America out of the game for the better part of the last decade. Slowing growth in China and war in the Middle East certainly haven't helped either.
These issues were specific to emerging markets and didn't have a lot to do with the United States. But U.S. trade policy under the Trump administration was a contributing factor, too. The Trump administration really shook up the status quo on trade, which rattled EM investors. This likely kept a lid on prices.
When historians look back at this period, they may conclude that the COVID pandemic marked the end of post-WWII globalization. Finely tuned global supply chains fall apart when confronted with the possibility of a country-wide quarantine. Furthermore, there is a growing consensus in both parties that the U.S. and China are rivals and no longer friends.
All of that said, a Biden administration would likely preside over a less confrontational trade agenda that should generally be better for emerging markets. The ETF to use for that, however, is not EEM, but its more cost-friendly sister fund, the iShares Core MSCI Emerging Markets ETF (IEMG, $52.09). IEMG, which provides access to nearly 2,500 emerging-market stocks, charges 55 basis points less annually than EEM (a basis point is one one-hundredth of a percentage point).
SPDR Gold MiniShares
- Assets under management: $3.3 billion
- Dividend yield: N/A
- Expenses: 0.18%
It was always messy and a little embarrassing. But the constant bickering between the Obama administration and the congressional Republicans throughout the 2010s wasn't all bad. The repeated government shutdowns kept spending in check to some extent and kept the budget deficit lower than it might have been.
We could get a repeat of that dynamic under a Biden administration if the Republicans maintain control of the Senate.
But let's say they don't. Let's say instead that there's a "blue wave" and the Democrats take both houses of Congress and the presidency.
Well, for better or worse, Joe Biden's policy platform is potentially expensive. And with the economy still in rough shape, the combination of increased government spending with sagging receipts could mean massive budget deficits for the foreseeable future.
Under that scenario, gold would make sense as a possible inflation and dollar devaluation hedge, and one of the cheapest and most cost-effective ways to buy it would be via the SPDR Gold MiniShares (GLDM, $19.70). GLDM sports an expense ratio of just 0.18%, making it one of the cheapest gold ETFs on the market.
Gold likely will continue to rise no matter who wins in November. Investors are genuinely worried about the health of the dollar these days, and with legitimate reason. But under an unrestrained blue-wave scenario, you might see gold's ascent speed up.
Charles Sizemore was long ET, GLDM and O as of this writing.