Spencer Platt and Brandon Bell/Getty Images
- Donald Trump and Kamala Harris are in an increasingly tense fight for the White House.
- Stocks broadly have climbed under each party's leadership, but certain sectors may fare differently.
- Oppenheimer shared an election investing playbook, including seven stocks set to hold up either way.
Last night's contentious debate between Donald Trump and Kamala Harris brought the looming presidential election fully into the mainstream, even for those who've been trying to block it out.
Investors likely know by now that US stocks have historically risen regardless of who's in office, so it may be tempting to tune out the battle between the former president and the current VP. Besides, allocating money based on political preferences can backfire.
However, strategists at Oppenheimer Research believe those who ignore the election — and the implications that electing Trump or Harris may bring — do so at their peril.
Like "Big Short" investor Steve Eisman and investment firms including Bernstein, Oppenheimer's top minds recognize that the outcome of this fall's elections could be a crucial catalyst for some sectors and a crippling headwind for others, even if the broader market is fine either way.
"This playbook is intended to help investors navigate trading dynamics around the elections," Oppenheimer strategists wrote in a September 9 note. "Over the longer term, we expect stocks' behavior will more likely be a function of broader market/industry-level trends and individual company performance."
7 stocks that can succeed, no matter who wins this fall
Anyone antsy about this fall's elections should target two types of stocks that Oppenheimer researchers believe will hold up no matter what, provided that economic growth continues: business development companies, and semiconductor firms.
So-called BDCs, which invest in the debt or equity of smaller companies, are more reliant on a healthy economy and labor market than the particular policies of Republicans or Democrats. Any party that can keep this economic expansion going would be celebrated by these firms.
"We don't think the BDCs would benefit from a sweep by either party as BDCs try to diversify their portfolio in order to lower risk," Oppenheimer strategists wrote. "BDCs focus on US companies, so policies that promote domestic growth would benefit the group."
Oppenheimer highlighted a quintet of companies with a track record of minimal credit losses and solid returns on equity, given that credit risk is often the chief downfall of BDCs.
The firm also spotlighted a pair of chipmakers, given heightened interest in artificial intelligence.
Democrats and Republicans seem to have similar policies regarding China, as they've taken steps to limit that country's access to high-end US chips due to national security concerns. Therefore, a victory by either party may have a similar outcome for this industry.
"We expect US foreign policy toward China to become more restrictive over the next four years, irrespective of who wins the election," Oppenheimer strategists wrote. "Related, the Biden administration passed the CHIPS Act in 2022 to provide $53 billion in funding to assist in the development and manufacturing of domestic semiconductors. Both parties are likely to support continued investments in a domestic semiconductor ecosystem."
Below are seven stocks with an outperform rating from Oppenheimer analysts and can survive regardless of whether Republicans or Democrats emerge victorious this fall. Along with each company is its ticker, market capitalization, group, price target, upside, and thesis.
Markets Insider
Ticker: ARCC
Market cap: $12.9B
Group: Business Development Companies
Price target and upside: $22; 7.1%
Thesis: "We estimate that Ares can earn an 11% return on equity, and given an estimated cost of equity capital of 9.75%, we calculate a fair value of $22.00/share, or 1.1x book value."
Source: Oppenheimer
Markets Insider
Ticker: CCAP
Market cap: $667M
Group: Business Development Companies
Price target and upside: $20; 11.1%
Thesis: "We estimate CCAP earns a 9.5% ROE, and given a cost of equity of 9.5%, we estimate fair value of $20.00/share (1x book value)."
Source: Oppenheimer
Markets Insider
Ticker: GBDC
Market cap: $3.9B
Group: Business Development Companies
Price target and upside: $17; 15.8%
Thesis: "We estimate that Golub can earn a 10% ROE, and given an estimated cost of equity capital of 9%, we calculate a fair value of $17.00/share, or 1.1x book value."
Source: Oppenheimer
Markets Insider
Ticker: OBDC
Market cap: $5.7B
Group: Business Development Companies
Price target and upside: $16; 9.7%
Thesis: "We estimate that OBDC can earn a 9.5% ROE, and given an estimated cost of equity capital of 9%, we calculate a fair value of $16.00/share, or 1.04x book value."
Source: Oppenheimer
Ticker: TSLX
Market cap: $2B
Group: Business Development Companies
Price target and upside: $23; 9.2%
Thesis: "We estimate TSLX can earn a 12% ROE, and given an estimated cost of equity capital of 9%, we calculate a fair value of $23.00, or 1.34x book value."
Source: Oppenheimer
Markets Insider
Ticker: NVDA
Market cap: $2,650B
Group: Semiconductors & Components
Price target and upside: $150; 38.8%
Thesis: "We see NVDA as the best-positioned semiconductor name in artificial intelligence. NVDA dominates the AI accelerator market with their current generation Hopper GPUs (H100 and H200). We expect NVDA to retain/expand its market leadership with the launch of its Blackwell architecture and rack-scale NVL36 and NVL72 SKUs later this year. … We expect NVDA's market position to continue whether Republicans or Democrats sweep the election."
Source: Oppenheimer
Markets Insider
Ticker: AVGO
Market cap: $689.9B
Group: Semiconductors & Components
Price target and upside: $200; 34.9%
Thesis: "The second-largest volume producer of AI accelerators, after NVDA, AVGO has produced GOOG's TPU for the last decade-plus. The chipmaker holds more than 75% share in the burgeoning custom compute accelerator market, supporting ASIC development projects at the world's largest CSPs/enterprises."
Source: Oppenheimer
from Business Insider https://ift.tt/2LaS5gI
No comments:
Post a Comment