Much has been made about the implications of the so-called Blue Wave government on global politics and economic activity. After the Democrats wrangled control of the Senate by the slimmest of margins, many investors are wondering how to reposition their portfolios to capitalize on the potential for sweeping reforms.
While the Biden administration may still struggle to enact certain legislation (and frankly who knows which campaign promises will stick), there are some industries that clearly stand to benefit. Financials, industrials, and clean energy are among the most likely winners. Here we highlight one stock in each area that looks to be in a good position to ride the Blue Wave higher over the next few years.
Can Ally Bank Stock Keep Rising?
One of the more likely scenarios is for an influx of fiscal stimulus measures. Government spending on infrastructure, education, and the beleaguered hospitality industry hold the potential to generate U.S. economic growth. This in turn could lead to increased inflationary pressures and a gradual increase in interest rates. Advantage financials—including banks, credit card companies, and insurance companies.
One of the more intriguing bank stocks is Ally Financial (NYSE:ALLY) whose $14 billion market cap makes it more limber than the big banks when it comes to growth opportunities. The online-centric bank appeals to younger generations of consumers and business owners due to its easy-to-use digital platforms and competitive loan products.
More than two-thirds of Ally's business is derived from auto financing so a continued rebound in the auto industry will be paramount going forward. But with complementary growth businesses in insurance, mortgage, and corporate finance, a healthier U.S. interest rate and lending environment could drive some well diversified revenue growth.
Ally's balance sheet is solid and affords it more opportunities for acquisition and shareholder friendly moves. This week it announced a stock repurchase authorization of up to $1.6 billion sending the stock to a fresh record high. Now riding a 9-month winning streak, this stock is showing no signs of slowing down. Investors should be looking for weakness in the share price to make Ally stock their friend.
Is United Rentals a Good Infrastructure Play?
Infrastructure was one the key themes of the Biden campaign—and the country's aging roadways, bridges, electricity, and water systems certainly point to a need for spending in this area. Throw in ambitions for universal broadband and the industrial sector will likely be very busy over the next four years.
The President-elect's plan to "build a modern, sustainable infrastructure" bodes very well for a company like United Rentals (NYSE:URI). As the world's largest equipment rental business, United Rentals has almost three times as many locations as its nearest competitor with stores across the U.S. and Canada (as well as a small, but growing presence in Europe).
As contractors require heavy machinery and construction equipment to complete infrastructure projects, United Rentals' business will be relied upon heavily. This increased volume will allow the company to continue to assert its dominance in the highly fragmented equipment rental industry.
United Rentals has also had a great run off its Spring 2020 bottom, but remains one of the most attractive ways to play the infrastructure theme. The stock is trading around 17x forward earnings (compared to similarly strong infrastructure peer Caterpillar at 37x) and should be built into a long-term growth portfolio.
Is SolarEdge Technologies Stock a Buy?
Finally, clean energy is another big focus for the new administration. As new energy bills and policies potentially get passed in the coming years, solar power is likely to be at the forefront of the carbon-free revolution.
Enter SolarEdge Technologies (NASDAQ:SEDG), a maker of an inverter solution that has been a game changer in the solar energy space. The company's inverters and optimizers are said to both maximize power generation and lower the cost of energy produced by solar photovoltaic (PV) systems that are commonly used by solar panel manufacturers. SolarEdge's inverter systems have been installed in more than 100 countries making the company a global play on the green energy revolution.
While its hard to assess the prospects of one of the increasing number of individual solar energy companies, SolarEdge's must-have products and unique position as a solar energy technology provider make it an intriguing clean energy play. It has a leading position in a fast-growing solar PV market that is likely to garner more attention as the world moves towards clean, renewable energy sources.
SolarEdge derives revenues from both the commercial and residential solar energy markets. While the commercial side of the business continues to feel the effects of the pandemic, residential product sales are growing globally.
A new partnership with energy management and automation company Schneider Electric will make it easier for homeowners to access solar power through a built-in energy monitoring solution—and gives SolarEdge an exciting growth driver in the form of the emerging smart home market.
With more than $1.2 billion of cash on the books, SolarEdge is in great shape financially. If the Blue Wave can drive home a green wave of clean energy action, this is one stock that can certainly produce some powerful long-term gains.
Before you consider SolarEdge Technologies, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and SolarEdge Technologies wasn't on the list.
While SolarEdge Technologies currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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