Historically, investors have gained a handful during election years from buying certain election stocks, but re-election years catch stronger returns. Since 1952, the S&P 500 has gained an average of 7% in election years, compared to 12.2% in re-election. This reflects presidents’ willingness to stimulate economic growth through fiscal and regulatory policies during re-election bids.
Other indices have also posted gains from investing in election stocks, but performance has been more modest. For instance, the DJIA returned 5.4% on average and Nasdaq 7.4% during election years. However, Nasdaq’s performance has been more volatile. During the last elections in 2020, the index surged 47.6%. In contrast, its nuggets drop was recorded in 2008, when it plunged 41.9%.
Election outcomes do influence certain election stocks and sectors depending on who wins. Some analysts believe a Biden re-election maintains the status quo, potentially benefiting past outperformers. On the other hand, others believe a Trump victory may spur changes in the military landscape, with defense added to the 2024 Presidential election stocks list.
Investors have the opportunity to gain from the election cycle by diversifying into promising industries and election stocks.
General Dynamics (GD)
The defense industry could gain under pro-military Trump but also from heightened geopolitical tensions regardless of the election winner. General Dynamics (NYSE:GD) can be one of the winners. The F-16 manufacturer may supply Ukraine and is well-positioned to benefit from additional funding and new program awards regardless of the outcome. It is also a major artillery shell producer as the US boosts 155mm ammunition output for NATO allies.
The company has a price-to-earnings (PE) ratio of 21x and pays a dividend yield of 2.1%. Analysts project annual earnings growth of almost 20% upside to $14.91 per share due to its $95.6 billion order backlog. In the most recent quarter, General Dynamics generated $1.1 billion in free cash flow and used almost half of it to pay off debt.
Enbridge (ENB)
Enbridge (NYSE:ENB) is a leading North American energy infrastructure company that could gain under either administration. On the one hand, Biden may restrict new pipelines and increase reliance on Enbridge’s existing infrastructure. On the other hand, Trump may spur production and transportation demand from increased drilling and crude output. The company owns and operates an extensive network of crude, liquids, and natural gas pipelines which would benefit under Trump.
With a 7.3% dividend yield and steady cash flows, Enbridge offers stability amid uncertainty. Trading at 33x PE with $2.61 billion available cash, up from $861 million last year, it has the firepower to invest in expansion should the opportunity arise. Moreover, the average price forecast among analysts is $39.80, compared to the current price of $36.70.
Granite Construction (GVA)
Granite Construction (NYSE:GVA) may be well poised to benefit from increased infrastructure spending in the lead-up to the 2024 US elections. As one of the largest infrastructure contractors in the US, the company may gain from state and municipal spending in addition to just federal. Contextually, it generated over 70% of its 2022 revenue from public infrastructure projects.
Trading at 0.66x price-to-sales ratio and offering a 1.1% dividend yield, Granite Construction reported an 11% increase in sales and a record committed projects backlog of $5.6 billion this year, up by $1.5 billion year-over-year. The company’s specialization in transportation infrastructure positions it strongly to capitalize on election-year infrastructure spending.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
