I spent months before the election ignoring pundits who predicted catastrophic market crashes should the “wrong” party win the 2020 election.
But, as I know they would, those predictions turned out to be so much hot air. The truth is a Republican victory would have been a bullish catalyst for one corner of the market, and a Democratic victory a bullish catalyst for another.
The stock market loves a divided government, wherein neither party gets to run the board on policy – particularly taxes and spending.
The outcome, along with news of two effective coronavirus vaccines around the corner, has sparked a massive rally, particularly in tech stocks.
The Nasdaq Composite, the market’s home of tech, has notched a better than 1,000-point gain since its October pre-election 30-day lows.
Of course, the past two administrations have presided over incredibly powerful, profitable tech-sector growth; the Nasdaq Composite has soared some 600% since January 2009.
Given the central, critical role tech is going to play in enduring the pandemic, recovering from it, and moving on during Biden’s tenure, the next four years could be even better than the last 12.
They could be some of the most profitable years ever for tech investors, and here’s how I recommend we get started…
White House Tech Priorities from Now Until 2024
As unpleasant as it is to imagine, the pandemic’s economic impact could have been worse – if it weren’t for the technologies that enabled around 70 million workers to do their jobs remotely and millions more to isolate in lockdown while staying connected.
This has caused a likely permanent shift in the demand for tech like cloud computing and videoconferencing, transforming companies like Zoom Communications Inc. (NASDAQ: ZM) from obscure firms to household names overnight – with a corresponding impact on stock prices.
Now, the economy is recovering of course, but the sheer size of the problem means recovery is likely to dominate – entirely – the first year of Biden’s term. We know that an effective, widely used vaccine is absolutely essential to that recovery.
We now have two vaccine candidates on the cusp of emergency approval, at which point the problem becomes logistics. The government has nearly 330 million people to vaccinate, and getting those vaccines from A to B is going to be a monumental challenge – and that’s with the U.S. military lending a hand.
I believe drones will have a huge role to play in vaccine logistics, and maybe even “last mile” delivery.
One of the Best UAV Stocks You Can Own
That said, Biden will be taking over at a great time for drones, also referred to as unmanned aerial vehicles (UAVs). Consider that IDC estimates U.S. shipments of commercial drones will jump to 5.7 million by 2022. That’s an increase of 216% from the 1.8 million that shipped last year.
And PwC (PricewaterhouseCoopers) says the total addressable market for commercial drones is $127.3 billion. Infrastructure and agriculture account for nearly 60% of that.
The president-elect is expected to push the FAA to grant more commercial licenses.
On top of that, his former boss, Barack Obama, relied heavily on military drones to fight the War on Terror. During those eight years, America made 10 times more drone strikes against insurgents and terrorists than in the eight years under Bush.
That makes Aerovironment Inc. (NASDAQ: AVAV) a great double-play. The firm has decades of experience selling drones and systems to the Pentagon, but it’s also working with businesses including farmers and 5G providers to bring them the benefits of unmanned aerial vehicles.
Over the past three years, AVAV has grown its earnings by 21%. At that rate, it could easily double in less than 3.5 years.
Once vaccination and recovery are underway in earnest, Biden’s team will no doubt want to pivot quickly to another plank of their platform: green energy.
Renewable Energy Is Tech’s New High-Performance Niche
During his campaign, Biden promised to rejoin the Paris Climate Accord and get America’s electric grid to be carbon-neutral by 2035.
The economic benefits of this changeover, in terms of job creation and GDP growth, could be substantial. But it will nevertheless require massive investments in wind, solar, hydro, biomass, and nuclear power. The Biden-Harris campaign’s full energy plan has a price tag of $2 trillion.
Biden’s program calls for putting in 500,000 electric vehicle charging stations by the end of 2030 and shoring up tax credits for buying electric vehicles.
More to the point, the Biden administration may well create a national solar incentive or mandate similar to California’s requirement that new homes be built with solar panels.
Even without that, analysts expect to see U.S. solar installations to grow by 42% from now through 2025.
And a very lucrative play on this is Israeli-based solar inverter manufacturer SolarEdge Technologies Inc. (NASDAQ: SEDG). Inverters are critical for providing consumable solar power; it won’t work without them.
SolarEdge makes some of the best inverters on the planet.
Over the past three years, the firm has grown earnings by an average of 30%. At that rate, they’re on pace to double in 18 months, not counting the impact of any new solar legislation out of Washington.
And of course there’s the issue that’s dogged presidents to one degree or another since Harry S. Truman lived at 1600 Pennsylvania Avenue.
Own a Huge Player in the World’s Second-Largest Economy
If there were any doubt, I mean China.
Trump pushed hard against Chinese telecom companies such as Huawei or ZTE working in the West. He and his team were worried they would be Trojan horses for Chinese intelligence.
That concern isn’t going away anytime soon, but where Trump took an almost relentlessly hard line on China, Biden has said words to the effect that he’ll seek to cool things down a few degrees. According to interviews, his administration is planning to work to improve relations and cooperate where there’s potential, and apply pressure where he sees anti-competitive Chinese practices.
The tough talk of the past four years hasn’t done much to chill China’s tech sector; it’s growing incredibly fast.
Much of that is down to China’s huge population shifts. Between 2015 and 2026, a whopping 250 million people will have moved from China’s poor countryside to its richer cities, and up into the middle class.
The demographic means tech-savvy consumers will drive China’s $14 trillion economy, second only to the United States. Unsurprisingly, the global pandemic has pushed China’s consumers online like never before.
And a really great way to get in on this action is with China’s e-commerce grandmaster, Alibaba Group Holding Ltd. (NYSE: BABA).
Last year alone, Alibaba and its many sites processed $1 trillion in gross merchandise volume. With 726 million annual active customers, Alibaba has more than twice as many users as the United States has people.
Fiscal 2020 revenue sits at a stunning $72 billion, a 31% jump from the prior fiscal year. On average, Alibaba is growing its earnings at 25% a year. At that rate, it will roughly double in just under three years.
And similar to the United States, COVID-19 led to a huge surge in e-commerce, the cloud, and fintech in China. Those trends aren’t going away, and Alibaba will remain a huge winner there. Own this one for the long haul.
Before you go, find out why the most successful investors put personal politics aside…
You see, whether you like him or not, a Biden administration is going to offer plenty of opportunities for tech investors – just as Trump and Obama did.
When we finally beat COVID-19, the economy comes back into full swing, and unemployment drops, different policy priorities will help direct capital into new growth segments in tech. Whatever happens over the next four years, tech investors are likely to continue to crush the market.
— Michael A. Robinson
Source: Money Morning