5 unbeatable stocks to buy for a Biden bull market
When President Joe Biden took office on January 20, 2021, he inherited one of the worst economic disasters in decades. The 2019 coronavirus disease pandemic (COVID-19) has wreaked havoc on the US and global economy, and it briefly put the US stock market in a tailspin.
However, a perfect storm could be brewing for stocks under the Biden administration. The Federal Reserve has pledged to stand firm on historically low lending rates, while the White House calls for billions of dollars in additional spending. This plentiful access to cheap capital is the perfect recipe for stocks to thrive in a rebounding economy.
If a Biden bull market were to take shape, the following five unbeatable stocks would be the ideal companies to own.
Few titles are more synonymous with the word “unbeatable” than Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), the parent company of the Internet search engine Google and the YouTube streaming platform.
Alphabet operates what could just as easily be an Internet search monopoly. According to GlobalStats, Google has consistently maintained a 91% to 93% global search engine market share for at least two years. Its closest competitor, Microsoft‘s Bing, barely registered with a 2.29% share of the search engine market in April 2021. Being such a dominant force in search means that advertisers will pay for top placement. It also suggests that the costs of acquiring the company’s traffic should come down over time. As the United States and the global economy improve, ad spending is expected to really increase.
But Alphabet is more than just searching the Internet. Advertising revenue generated by YouTube – one of the three most visited social sites on the planet – jumped 49% in the first quarter to $ 6 billion. Meanwhile, Google Cloud cloud infrastructure segment revenue increased 46% to $ 4 billion. These once small ancillary operations are now on track to contribute $ 40 billion in sales to Alphabet on an annual basis.
Despite being priced at $ 1.6 trillion, Alphabet is still a steal.
For two decades, the pharmaceutical stock AstraZeneca (NASDAQ: AZN) was a largely forgettable drug developer who battled competition and the patent cliff. Today, it has reinvented itself as a real growth stock with a bright future.
AstraZeneca’s main growth driver is the company’s oncology segment. In the first quarter alone, constant currency sales jumped 16% to $ 3.02 billion. The company’s successful trio, Tagrisso, Imfinzi and Lynparza, led the way with constant currency sales growth of 13%, 17% and 33% respectively. The successful diabetes drug Farxiga also deserves a mention with its 50% growth in constant currency sales in the first quarter of 2021. The company’s branded treatments are on fire and this has led to sustained double-digit growth. of sales.
The ongoing acquisition by AstraZeneca of Alexion Pharmaceuticals (NASDAQ: ALXN). Alexion is a developer of ultra-rare therapeutic products. Although it is risky to develop treatments for such a small group of patients, success is generally met without competition and with little or no repulsion from health insurers on high list prices.
The best part of the deal with Alexion is that the company has developed a replacement for its best-selling drug, Soliris. The new generation therapy, known as Ultomiris, is given less frequently, which is positive for patients. Eventually Ultomiris will swallow up Soliris sales and block Alexion / AstraZeneca’s cash flow for a long time.
Another unbeatable stock that can deliver superior returns with Biden in the White House is the Payments Facilitator. MasterCard (NYSE: MA).
Like most financial stocks, Mastercard is cyclical. That means it struggles when the US and global economy contracts or goes into recession, and thrives when the economy is spinning on all cylinders. This is because it relies on merchant fees through payments to generate its top and bottom results. But the important thing to understand about cyclical companies like Mastercard is that time is on their side. While recessions often last a few quarters, booms typically last several years. Considering the amount of money the Biden administration is trying to pump into the U.S. economy, Mastercard should have a field day.
It should also be taken into account that Mastercard has chosen not to be a lender. Although some of its peers act as both sub-contractors and lenders (via credit cards), and therefore are able to double their rates during economic expansions, avoiding Mastercard lending is on the way. made a smart decision. When recessions inevitably strike and credit delinquencies increase, Mastercard hasn’t put funds aside. That’s why he bounces back much faster than his peers during the early stages of a recovery.
The math here is simple: As the economy grows, consumers and businesses will spend, spend, and spend more. This is music to the ears of all Mastercard shareholders.
Annaly Capital Management
Don’t worry, I haven’t forgotten about you dividend income seekers. If a Biden bull market takes shape, the Mortgage Real Estate Investment Trust (REIT) Annaly Capital Management (NYSE: NLY) could be a smart place to grow your money.
Without getting too technical, mortgage REITs like Annaly borrow money at short-term lending rates and use it to buy securities with higher long-term yields. In Annaly’s case, we’re primarily talking about Mortgage Backed Securities (MBS). The difference between the long-term yield received and the short-term borrowing rate is called the net interest margin (NIM). The larger the NIM, the more profitable Annaly and the greater the dividend it can provide to shareholders. Currently, Annaly Capital is producing a staggering 9.7% return.
What makes Annaly such a perfect stock to buy is that we are seeing a steepening in the yield curve. When the US economy rebounds from a recession, it is normal for long-term yields to rise and short-term yields to fall or stabilize. When this happens, Annaly usually experiences an enlargement of her NIM.
In addition, Annaly almost exclusively buys agency titles. It’s a fancy way of saying that the MBS he buys are backed by the federal government in case of default. This protection is what allows the business to use leverage to its advantage, thereby increasing its profits.
Finally, pet health insurance company Trupanion (NASDAQ: TRUP) looks like an unbeatable stock to buy in a Biden bull market.
The pet industry might not offer flashy growth prospects like cybersecurity or cannabis, but it is arguably the most consistent growth opportunity. It has been more than a quarter of a century since pet spending in the United States has declined year over year. Additionally, the American Pet Products Association notes that the percentage of U.S. households owning a pet has increased from 56% in 1988 to 67% by 2019-2020. If we’ve learned anything about pet owners, it’s that they are willing to spend a lot of money on the welfare of their four-legged family members.
Trupanion, which recently lifted the veil on its first quarter operating results, is approaching one million total enrolled pets (943,854 at the end of the first quarter of 2021). Surprisingly, this represents just over 1% of the US market penetration. In the UK, around 1 in 4 pet owners take out insurance for their cat or dog. If Trupanion can achieve a similar penetration rate, its addressable market would be over $ 32 billion.
It is a company that has spent two decades building relationships with veterinarians and their staff at the clinical level. It is also the only major pet health insurance provider to offer software capable of handling payments to vets at the time of payment.
The sky is the limit for Trupanion.
This article represents the opinion of the writer, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.