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How To Buy The Midterms

rankings and lists Nov 08, 2022

Today is Election Day!

While we'll need to wait another 2 years before the next President is decided, these midterm elections are used to decide all 435 seats in the House of Representatives and 35 of the 100 seats in the Senate.

And the importance of this day cannot be understated.

If the Democrats win the majority, President Biden will have a much easier time pushing through items on his agenda over the next two years.

If the Republicans win the majority, then a lot of President Biden's initiatives will likely be blocked.

While there's a lot of nuance in the outcome of either event, at a high level, a win by either party has massive implications for investors.

  • If the Democrats win, we'll likely see a surge in certain parts of the stock market like Green Energy, China-based stocks, and Cannabis.

    • At a high level, Democrats want to reduce global warming which would massively benefit all companies operating in the green energy sectors. Past energy, Democrats also are more lax on their stance towards China and this would only benefit Chinese corporations. And lastly, Democrats have actively been trying to legalize Cannabis for some time now and with a stronghold on Congress, the ease of this path would continue.

  • If the Republicans win, we'll likely see a surge in Tech, Healthcare, and Oil.

    • At a high level, Republicans believe in a low regulatory environment and using traditional means of harvesting energy. Given tech & healthcare are so heavily scrutinized, lower regulation would benefit the short-term profits of corporations in these sectors. Additionally, Republicans would double down on our oil output as the Russian conflict rages on.

While this list isn't exhaustive, the point is that depending on who's occupying our government, the downstream effects for investors are impactful.

We are not taking a stance on either side of the fence, but just spelling out what sectors would benefit, depending on who wins the majority. Based on this, it's undeniable, that certain stocks are going to have new tailwinds coming their way.

If the last several years have taught us anything, it's that politicians and the market are more intertwined than ever.

So, with that context, today we are going to show you our top 3 stocks in either outcome -- aka when the Democrats or Republicans win!


Top 3 Stocks If Republicans Win:

It's truly hard to pick just 3 stocks from our entire coverage universe, but we see direct correlations with stock returns and a shift in power for these three stocks.

As we've mentioned, we are not siding with either political party. We are just showing which stocks would do well under a different regime.

  1. SoFi: Outside of our long-term thesis on SoFi, President Biden's administration has done this stock no favors. That's because a large portion of SoFi's business relies on student loans and given President Biden has pushed out the moratorium repeatedly, SoFi's stock has continued to suffer. However, should the Republicans win, there's a high chance President Biden will no longer be able to forgive student loans and push back the dates of these payments. If you want to see our full analysis on SoFi, just click here.

  2. Our #1 Pick Of 2023: Our top pick of 2022 is now being rolled into our top pick for 2023. That's because this stock has absolutely ripped over the last year -- as it's up over 112% on the year! As one of the best-performing stocks in the world right now, they would continue to see extremely strong tailwinds pushed their way, should Republicans win the majority. If you want to see the entire analysis, just click here.

  3. Eli Lilly: Out of all of the legacy healthcare stocks, Eli Lilly has an absolutely insane opportunity ahead of them. Recently they've completed drug trials on a medication that significantly reduces obesity. How does it work? This new medication essentially curbs your appetite and forces you to eat less -- which helps you lose weight and avoid serious diseases like diabetes, heart disease, etc. Regardless of who wins, this drug will be an absolute game-changer. However, if Republicans win, they'll likely curb back some of the regulations on drug prices that the Biden Administration has enacted. Higher drug prices = more profits -- which only helps Eli Lilly further. If you want to see our full analysis of Eli Lilly, just click here.


Top 3 Stocks If Democrats Win:

It's truly hard to pick just 3 from our entire coverage universe, but we see direct correlations with stock returns and a shift in power for these three stocks.

  1. First Solar: Of all the items on the Democrat's agenda, clean energy is close to the top of their priorities. Therefore, companies like First Solar, would directly benefit from more Government funding and subsidies. While Republicans winning wouldn't doom this stock, it likely presents new headwinds that aren't there today. If you want to see our full analysis of First Solar, just click here.

  2. Nio: While President Biden is not a fan of China, to put it lightly, he also isn't as tough on them as the prior administration was. Regardless of your views on this matter, the facts are that Democrats would be better for Chinese stocks than Republicans would be. If Republicans win the midterms, they'll likely be increased pressure on Chinese-listed stocks. But if the Democrats maintain their majority, then the pressure of de-listing remains subdued. If you want to see our full analysis on Nio, just click here.

  3. Constellation Brands: The company behind brands like Corona, Modelo, Svedka, and more, also has a massive presence in the Cannabis industry. And should the democrats maintain majority power, the agenda of legalization is going to continue down its path -- which benefits all companies in the Cannabis sector. And Constellation has been and continues to be one of our top adult beverage and cannabis stocks for the next 5 years. If you want to see our full analysis on Constellation Brands, just click here.

Bonus: While this isn't a "stock pick", this entire portfolio will receive strong tailwinds should the Democrats maintain their dominant position.

That's because ESG stocks are highly favored by the Democratic party as they have a strong preference for reducing global warming and our carbon footprint.