This has been a tumultuous year for Wall Street and investors. Though the stock market is always volatile, the coronavirus disease 2019 (COVID-19) pandemic has whipsawed equities like few events we’ve seen before it. It took less than five weeks for the broad-based S&P 500 to lose more than a third of its value, and under five months to recoup everything that was lost.
The good news for investors is that short-term pain is a recipe for long-term gain. You see, every single stock market crash and correction has eventually been put into the rearview mirror by a bull market rally. That makes volatility the friend of long-term investors — and it just so happens to be picking up again.
Following the election of Democrat Joe Biden as the 46th president of the United States, there’s bound to be short-term turbulence as Wall Street contemplates what the administrative transition might look like, as well as how successful Biden will be in implementing his bigger picture policies. This may create an opportunity for long-term-oriented investors to strike.
If you have $5,000 in cash at the ready that won’t be needed to cover bills or emergencies, then I’d encourage you to put that money to work in the following three surefire stocks with Biden as president.
If there’s one company investors can comfortably buy with Biden in the White House, it’s e-commerce giant Amazon (NASDAQ:AMZN).
The COVID-19 pandemic may well have permanently shifted consumption habits. Though we’re not going to see physical stores going away anytime soon, the propensity to shop online is on the rise and here to stay. That’s fantastic news for the most dominant online retailer in the U.S., Amazon.
An eMarketer analysis from earlier this year forecast that Amazon would control 38.7% of all online retail in 2020, with its share rising an estimated 100 basis points to 39.7% in 2021. In aggregate, Amazon’s e-commerce sales are expected to surpass $300 billion next year. Even accounting for the thin margins associated with retail sales, Amazon has been able to pivot its online dominance into signing up more than 150 million Prime members worldwide. These Prime members tend to greatly outspend non-Prime members, and they’re incented to stay within Amazon’s universe of products and services.
We’re also not going to see a slowdown in cloud-based spending under a Biden presidency. Amazon’s infrastructure cloud platform Amazon Web Services (AWS) is turning into an absolute juggernaut before our eyes. AWS has grown sales by 29% in back-to-back quarters, and is churning out an annual run-rate of over $46 billion in sales. More importantly, AWS has much juicier margins than what Amazon generates from its e-commerce segment, which means operating cash flow should skyrocket for the company in the coming years.
Elanco Animal Health
Another surefire stock that can be bought with Biden as president is Elanco Animal Health (NYSE:ELAN).
If Elanco is a company you already follow, you might be rolling your eyes at this statement. This past Friday, it was clobbered after reporting weaker-than-expected third-quarter operating results. In particular, its Farm Animal segment was negatively impacted by COVID-19 to the tune of $35 million. However, with a more cohesive federal COVID-19 pandemic plan on tap once Biden takes over on Jan. 20, there’s reason to believe that the coronavirus won’t have a long-term negative impact on Elanco.
One thing that’s really exciting about this company is the now-completed acquisition of Bayer Animal Health from Bayer. Aside from making it the No. 2 animal healthcare company, this acquisition significantly beefed up Elanco’s exposure to the companion animal market, which should now make up around half of all sales. This buyout is also expected to yield between $275 million and $300 million in eventual annual cost synergies.
Additionally, pet owners have shown their willingness to spend big on their four-legged friends. The American Pet Products Association expects $99 billion in spending this year on companion animals, with a little over $30 billion going toward veterinary care and products.
The pet industry is a beast that cannot be stopped, and companies like Elanco Animal Health should perform well under a Biden presidency.
When you think of surefire winners, a gold stock like Barrick Gold (NYSE:GOLD) probably isn’t the first thing to come to mind. But make no mistake about it, the outlook for gold stocks has never been more lustrous, and should continue to be so under a Biden presidency.
On a macro level, the table is set for a higher spot price. The Federal Reserve has made clear its intention to keep interest rates at or near record-tying lows through 2023. When coupled with the $17 trillion in negative-yielding investment-grade debt, this is a recipe for income seekers to stay away from bonds and to instead put their money to work in gold as a store of wealth.
More specific to Barrick Gold, the company has been making substantial headway on its debt. Higher realized precious-metal prices, along with the company focusing on the buildout of higher ore-grade mines, allowed it to reduce its net debt by 71% from the sequential second quarter to $417 million. Record free cash flow of $1.3 billion also doesn’t hurt.
Barrick Gold looks to be on track to deliver an all-in sustaining cost of just under $1,000 per gold equivalent ounce (GEO) in 2020, with the real potential to push this down to an AISC of $900 per GEO in the future. This gives the company a comfortable cash operating margin of between $900 and $1,000 per GEO, and it should allow Barrick to continue improving on its financial flexibility.
Gold stocks have the potential to be quite lustrous with Joe Biden in the White House.