In this article, we will take a detailed look at the 10 Best Stocks to Buy Before US Election Season 2024. For a quick overview of such stocks, read our article 5 Best Stocks to Buy Before US Election Season 2024.
As if anticipation of rate cuts, the Fed’s battle against inflation and keeping up with AI-fueled rally in stocks wasn’t enough for investors, the upcoming election-related anxieties are starting to make the financial markets jittery. There are a number of credible reports out there that discuss the behavior of financial markets during US election years. For example, a Morgan Stanley report analyzed some data to see how the S&P 500 performs during election years. This analysis shows that during presidential election years from 1928 through 2016, the stock market has seen more positive performance than negative. The report also said the election of a Republican president resulted in average gains of 15.3% for the S&P 500, compared to a 7.6% gain when a Democrat president comes in the White House.
A 2020 report by T. Rowe Price analyzed historical data on the connection between US elections and the stock market and found some interesting patterns. For example, the report said if the stock market performance is strong ahead of elections in the US, data shows that chances of the incumbent party staying in power increase. On the other hand, when the stock market is soft heading into elections, incumbent party often loses. But does that mean President Joe Biden could notch a second term if the Fed begins to cut rates in the summer and stocks keep gaining ahead of the election? That would be wrong conclusion to deduce from this pattern as the T. Rowe report shed light on a plethora of factors that affect the relationship between the stock market performance and election results. The report also said historical data shows if the incumbent party loses an election, a recession year follows:
“Conventional wisdom argues that stock markets tend to perform poorly ahead of elections. Since 70% of the years when the incumbent party lost were followed by a recession year, it makes sense that equity markets performed poorly in the wake of the elections when the incumbent party lost.”
If you were to ask an average American today about the hottest issues that would be the point of focus in the US election this year, chances are that their answer would be inflation. But we are still months away from the election and a lot could change. Morgan Stanley analyst Michael D. Zezas recently said in a report that in 2008 expectations were that the elections would move around the US foreign policy. But the financial crisis changed everything. Similarly, presidential candidates in the US election 2020 focused their energies on healthcare and pandemic.
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Methodology
For this article we went through multiple research reports and analyses of experts who took a look at what stocks and sectors usually benefit during election years. We picked 10 stocks which analysts are specifically recommending investors in 2024 because of election-related catalysts. Some top names include JPMorgan Chase & Co. (NYSE:JPM), Exxon Mobil Corp (NYSE:XOM) and Pfizer Inc (NYSE:PFE).
10. Sempra (NYSE:SRE)
Number of Hedge Fund Investors: 33
Goldman Sachs in its November 2023 report highlighting election 2024 stocks named Sempra (NYSE:SRE), the California-based utility company which has a dividend yield of about 3.38%. Goldman Sachs analyst Carly Davenport said the following about Sempra (NYSE:SRE):
“This quarter increased our conviction that Sempra (NYSE:SRE)’s Texas utility Oncor is a material strength for the company. The reduction of regulatory lag, potential increase in capex, and a clear runway for organic load growth in the region all highlight why we have viewed Oncor as an underappreciated asset for Sempra (NYSE:SRE). We believe SRE has several key catalysts ahead, including the aforementioned capex raise, the conclusion of the California GRC (general rate case), and the announcement of FID for the Cameron expansion and Port Arthur Phase 2 in 2024. Sempra (NYSE:SRE) continues to trade at a 0.7x discount to our coverage group on our 2025 numbers, which we view as unwarranted given these strengths.”
ClearBridge Large Cap Value Strategy made the following comment about Sempra (NYSE:SRE) in its Q3 2023 investor letter:
“Our two utilities Sempra (NYSE:SRE) and Edison International were also negatively impacted by rising rates, although both outperformed the utility benchmark. We maintain a large active overweight to Sempra and added opportunistically to Edison to reflect its strong fundamentals.”
9. Fox Corp Class B (NASDAQ:FOX)
Number of Hedge Fund Investors: 38
Fox Corp Class B (NASDAQ:FOX) will be one of the biggest beneficiaries of the huge political ad spending in the US ahead of the 2024 elections. A latest Reuters report cited data from Insider Intelligence which said political ads spending in 2024 will be 30% more than 2020. The data said a whopping 71.9% of this total spending will be funneled to TV.
Earlier this month Fox Corp Class B (NASDAQ:FOX) posted fiscal second quarter results. Adjusted EPS in the period came in at $0.34, beating estimates by $0.22. Revenue in the period fell 8.2% year over year to $4.23 billion, beating estimates by $20 million.
Fox Corp Class B (NASDAQ:FOX) management talked about its expectations regarding political ads revenue and other important updates during the earnings call earlier this month:
“We have an impact from preemptions with election and unfortunately with war coverage. So the preemptions are affecting and ratings are continuing to improve. So we’re happy with where we are at Fox News as all those trends are improving steadily. Local stations is probably the most mixed. But you have a bad comparison, particularly in the current pacings with Super Bowl comps this time last year. It’s probably about $50 million in Super Bowl revenue, just in the station group this time last year.
So the comparisons are quite tough as we go forward, but we remain confident that we’ll see a record political cycle. This is slightly ameliorated, I think in the current quarter with the lack of a competitive primary competition, but we’re already seeing business in the first half of next year start to flow in from a political perspective. And it’s — obviously, it’s sort of natural because our stations, we have large number of stations in key political markets like Georgia and Michigan, Pennsylvania, Arizona and Wisconsin. So we’re very confident in a very strong political cycle once that really starts to flow. And then finally with Tubi. Tubi’s TBT is continued to grow, I think at 62%, 63%. And obviously with the TBT growth, the revenue is following, the revenue growth is slightly less or somewhat less than it was last year.”
Read the entire earnings call transcript here.
8. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Investors: 48
Caterpillar Inc. (NYSE:CAT) was one of the biggest beneficiaries of the huge infrastructure spending plans initiated by the Biden administration. Goldman Sachs believes if the Republicans come into power, infrastructure stocks like Caterpillar Inc. (NYSE:CAT) will continue to grow as the new government will begin constructions on borders to stop illegal immigrants.
Earlier this month, Caterpillar Inc. (NYSE:CAT) posted fourth quarter results. Adjusted profit jumped 35% from a year earlier to $5.23 a share, surpassing estimates of a $4.75 per share profit.
In addition to Caterpillar, hedge funds are also buying JPMorgan Chase & Co. (NYSE:JPM), Exxon Mobil Corp (NYSE:XOM) and Pfizer Inc (NYSE:PFE).
Diamond Hill Large Cap Strategy made the following comment about Caterpillar Inc. (NYSE:CAT) in its Q3 2023 investor letter:
“Caterpillar Inc. (NYSE:CAT), the world’s leading manufacturer of construction and mining equipment, also performed well this quarter. Caterpillar has managed to leverage increased capital investment from various end markets, contributing to better than expected fiscal results for Q2. The company is poised to be one of the largest beneficiaries of several government funding initiatives, including the IRA (Inflation Reduction Act) bill, CHIPS Act and infrastructure bill. These measures are expected to support construction spending for several years, providing a robust backdrop for Caterpillar’s continued growth.”
7. MONDELEZ INTERNATIONAL INC Common Stock (NASDAQ:MDLZ)
Number of Hedge Fund Investors: 51
In November 2023 Goldman Sachs published a report discussing the US election and its possible impact on the stock market. Goldman Sachs mentioned a couple of stocks it believes were poised to gain strength during the election years. MONDELEZ INTERNATIONAL INC Common Stock (NASDAQ:MDLZ) was one of these stocks. Goldman Sachs said consumer defensive is one of the sectors that perform well during election years.
Goldman Sachs analyst Jason English praised MONDELEZ INTERNATIONAL INC Common Stock’s (NASDAQ:MDLZ) spending in commercial and business expansion in other countries. The analyst set an $82 price target on the stock with a Buy rating.
6. Lockheed Martin Corp (NYSE:LMT)
Number of Hedge Fund Investors: 58
Defense stocks will remain in the spotlight amid growing security concerns and a volatile geopolitical situation. The conflict in the Middle East and raging war in Ukraine will keep forcing the US to up its defense spending no matter the outcome of the Presidential Election in 2024.
A latest report by Reuters recently said that Lockheed Martin Corp (NYSE:LMT) plans to boost output of weapons systems to meet greater demand amid growing worries about security. The report said Lockheed Martin Corp (NYSE:LMT) plans to double its production of High Mobility Artillery Rocket Systems (HIMARS).
In addition to Lockheed, JPMorgan Chase & Co. (NYSE:JPM), Exxon Mobil Corp (NYSE:XOM) and Pfizer Inc (NYSE:PFE) can also gain this year according to analysts.
RiverPark Advisors made the following comment about Lockheed Martin Corporation (NYSE:LMT) in its Q3 2023 investor letter:
“Lockheed Martin Corporation (NYSE:LMT): LMT is the world’s largest aerospace and defense contractor. With about 70% of its $66 billion in revenue from the U.S. government, the company is well positioned to benefit from U.S. defense budget growth, historically 5%-6% per year, as well as increased global military spending. With a $158 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year (up from 141 in 2022) in the coming years, we believe the company could grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions, debt repayment, a 2.9% dividend yield, and continued share buybacks from more than $6 billion per year of free cash flow should lead to even greater shareholder returns. We re-initiated a small position in August.”
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Disclosure: None. 10 Best Stocks to Buy Before US Election Season 2024 is originally published on Insider Monkey.
