What Investors Should Consider as Election Season nears?

As the November elections nears, people are asking what to consider for investment. The elections could bring changes with impacts on tax, trade and spending policies. There are lots at stake with the elections, 435 House seats and about a third of Senate seats up for grabs, not to mention all the state-level elections. What does all of this mean for investors?

According to Paul Christopher, CFA, Head of Global Market Strategy at Wells Fargo Investment Institute, in a note published by Wells Fargo, investors should stay the course and try to find common grounds. Christopher talks about potential challenges, waiting on opportunities and making a plan.

Christopher says, “Try not to extrapolate from campaign promises to policies. Even if one can guess the presidential outcome, it is much more difficult to guess how the different groups within parties will balance power among themselves, or what the legislative priorities are going to be.”

For the long-term investor, changing anything based on political speculation can be risky. “Don’t jump to conclusions about elections, especially based on polls,” Christopher says, “and especially if investors are sensitive to tax consequences.”

Common ground

According to Christopher, there are a few sectors where Republicans and Democrats will find broad agreement. These sectors are infrastructure, healthcare, internet infrastructure, and income support programs.

He says infrastructure spending would help the materials and industrial sectors, including companies that make construction equipment, construction companies themselves, and companies that make asphalt and concrete. Improving internet infrastructure could also benefit companies that produce the cables and towers.

I myself agree that both Democrats and Republicans have talked about infrastructure spending. We have been hearing about it for sometime and in my opinion it will materialize in the coming few years regardless of who wins the elections. Unless of course some drastic changes happen to the policies.

Industrial sector

Shall the infrastructure spending bill gets approved we will definitely see a positive impact on industrial companies. One particular company I have been following is H&E Equipment Services, Inc. [stock_quote symbol=”HEES”]. They are in the equipment rental business, equipment sales business and equipment services business. As of March 2, 2020, it had a network of 94 locations throughout the Pacific Northwest, West Coast, Intermountain, Southwest, Gulf Coast, Southeast, and Mid-Atlantic regions of the United States.

I even think HEES is still attractive in the short term because of the many natural disastrous that had hit the country from hurricanes to the fires on the West Coast. All the rebuilding efforts will put increased demands on industrial equipment and therefore benefiting H&E business.

H&E main competitor is United Rentals [stock_quote symbol=”URI”] which I also like for the same reasons, specifically if an infrastructure bill will be approved in the coming years.

Currently HEES is trading around $20.79 per share, while URI is trading around $176 per share.

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