A blue wave in Washington could boost these stocks.
Investors who remember 2016 know not to jump to conclusions about the upcoming U.S. election based on poll numbers alone. However, with the election just days away, the Democrats are positioned to potentially gain significant ground in Washington. National polling has consistently shown Democrat Joe Biden with an 8- to 11-percentage-point lead over President Donald Trump. Online prediction market PredictIt also has the odds Democrats will gain control of the White House and both houses of Congress at 51%. Here are eight stocks that could be big winners from a blue wave in Washington, according to Bank of America.
Southwest Airlines Co. (ticker: LUV)
Goldman Sachs recently said a blue wave in November would likely result in “substantially more fiscal support” for the economy, including a large stimulus package in the first quarter of 2021. Airline stocks like Southwest Airlines have been crushed in 2020 due to a sharp drop in travel, but those airline stocks have rallied on any headlines about further stimulus. Bank of America analyst Andrew Didora says Southwest is the best-positioned major U.S. airline to navigate the downturn and gain market share during the recovery. Bank of America has a “buy” rating and $44 price target for LUV stock.
Lowe’s Cos. (LOW)
Unlike airline stocks, home improvement retailers have been thriving. Lowe’s shares are up about 40% year to date. If a Democratic stimulus bill includes another round of $1,200 checks, the stock could be headed even higher. Americans have diverted their travel, restaurant and live event budgets into home improvement projects, and analyst Elizabeth Suzuki says that trend will likely continue. Lowe’s reported record same-store sales growth in the second quarter. Suzuki says Lowe’s is gaining market share from competitors and increasing its wallet share among existing customers. Bank of America has a “buy” rating and $202 price target for LOW stock.
Penn National Gaming (PENN)
Casino stocks with exposure to online and sports gambling have been on fire this year. Penn National Gaming is a U.S. regional casino operator, but it also owns 36% of Barstool Sports, which recently launched a sports gambling app. While it may be difficult for Americans to attend sporting events, they will certainly be watching and potentially gambling a portion of their stimulus checks. Analyst Shaun Kelley says initial Barstool Sportsbook app data is strong, and more states will legalize online and sports gambling in coming months. Bank of America has a “buy” rating and $85 price target for PENN stock.
McDonald’s Corp. (MCD)
Restaurants on the low end of the price scale were some of the biggest winners from the first round of stimulus. Fast food businesses are also extremely sensitive to changes in consumer discretionary spending. Analyst Gregory Francfort says Americans are getting tired of eating their own cooking but still aren’t completely comfortable dining in restaurants, especially given flu season is imminent. McDonald’s drive-thru and delivery businesses have been booming and would likely continue to do so if Democrats send out more stimulus checks. Bank of America has a “buy” rating and $250 price target for MCD stock.
Near-term stimulus is great, but Democrats also have longer-term plans as well. One of their priorities has been facilitating the transition to clean energy, an initiative that could be good news for residential solar stocks like SunRun. SunRun recently merged with Vivint Solar to create the largest vertically integrated American installer and owner of solar generation equipment. Analyst Julien Dumoulin-Smith says the U.S. residential solar market is likely experiencing pent-up demand heading into 2021, and Democrats could provide financial incentives to accelerate that demand. Bank of America has a “buy” rating and $79 price target for RUN stock.
Trump has made the ongoing U.S. trade war with China a centerpiece of his first term in office. If Democrats sweep the election, fears concerning an escalating trade war and delisting of Chinese stocks may be put to rest. If investors can look past the trade war to the impressive growth numbers from Chinese e-commerce stock JD.com, they may see an attractive entry point. Analyst Eddie Leung says JD.com has a long growth runway in a massive and rapidly expanding Chinese market. Bank of America has a “buy” rating and $89 price target for JD stock.
Under President Barack Obama, shares of health insurance giant Humana gained more than 400%. Analyst Kevin Fischbeck says Humana is a heavy hitter in a high-growth market, and the stock has a number of potential bullish catalysts ahead in coming quarters. Baby boomers are increasingly opting for Humana’s private Medicare option, and Medicare plans made up 82% of the company’s premiums and services revenue in 2019. Fischbeck is projecting earnings per share growth will ramp from 4.8% in 2020 to 19.5% in 2021. Bank of America has a “buy” rating and $490 price target for HUM stock.
Canopy Growth Corp. (CGC)
Shares of Canadian legal cannabis producer Canopy Growth and other cannabis stocks have soared since Sen. Kamala Harris mentioned during the vice presidential debate decriminalizing marijuana and expunging the records of Americans convicted of cannabis crimes. A progressive approach to cannabis legislation would be great news for cannabis stocks. Analyst Bryan Spillane is bullish on Canopy due to its leading share of the Canadian market, its robust balance sheet and its exposure to the U.S. market via a conditional buyout of Acreage Holdings (ACRHF). Bank of America has a “buy” rating and $22.62 price target for CGC stock.
These stocks could help you catch a blue wave:
— Southwest Airlines Co. (LUV)
— Lowe’s Cos. (LOW)
— Penn National Gaming (PENN)
— McDonald’s Corp. (MCD)
— SunRun (RUN)
— JD.com (JD)
— Humana (HUM)
— Canopy Growth Corp. (CGC)
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