5 essential stocks for a Biden bull market

It’s been a big month for Wall Street. Last week, Pfizer and BioNTech has published the results of the Phase 3 study for their 2019 coronavirus disease (COVID-19) vaccine BNT162b2, which has shown an efficacy rate of over 90%. It blew up expectations for vaccine effectiveness and gave hope that there is light at the end of the tunnel.

After several days of counting, Democratic Party challenger Joe Biden was elected 46th President of the United States. Even as Congress remains divided, with Democrats controlling the House and Senate led by Republicans, we are bound to see at least some policy changes moving forward.

But the big advantage of Biden’s election is the likelihood of a prolonged bull market under his presidency. Interest rates are expected to remain unusually low for years to come, and the top corporate tax rate is unlikely to rise with a divided Congress. The fact that Democratic presidents have overseen an average 10.6% annual stock market gain since 1945 doesn’t hurt either.

While nothing is guaranteed in the stock market, there’s a good chance that the broader stock indexes will reach new highs under a Biden presidency. In my opinion, that makes the following five must-do actions with Biden in the White House.

Intuitive surgery

Innovation in healthcare will take center stage in the years to come, making the developer of surgical systems Intuitive surgery (NASDAQ: ISRG) a business that you will want to own.

By the end of September, Intuitive Surgical had installed 5,865 of its da Vinci surgical systems around the world, most of them located in the United States. It might not sound like a lot of systems installed over 20 years, but it dwarfs the competition on a combined basis. The company has become the go-to benchmark for surgical systems and has developed invaluable relationships with hospitals and surgical centers nationwide.

Of course, the best aspect of Intuitive Surgical is its business model of razors and blades. During its early years, the company generated most of its revenue by selling its da Vinci systems. These systems have generated a lot of revenue, but only poor margins. But the instruments and accessories sold with each soft tissue procedure, as well as the maintenance of its systems, have gradually become a larger percentage of total sales. Since these are significantly higher margin segments, Intuitive Surgical’s operating margins are expected to increase as the company’s installed base of systems grows.

NextEra Energy

One of the clearest changes between a presidency of Biden and Donald Trump will be the renewed interest in renewable energy sources. Fortunately, the stock of electric utilities NextEra Energy (NYSE: NEE) is ahead of the curve.

While the utilities industry is generally slow growing and often boring, NextEra is different. For more than a decade, NextEra’s compound annual growth rate has been at high numbers, with the company’s massive investments in green energy projects driving this growth. No utility generates more capacity from solar and wind power than NextEra. That means it runs all potential clean energy mandates out of Capitol Hill and produces some of the cheapest electricity in the country.

Plus, don’t overlook the impact that the Federal Reserve’s accommodative monetary policy can have on the business. NextEra often finances its green energy projects through debt. Given the Fed’s efforts to keep lending rates at historically low levels, NextEra has an incentive to aggressively tackle new clean energy projects and consider converting fossil-fuel power plants to energy sources. cleaner energy.

Visa

A bull market almost always means a steady rise in consumption, and that should be great news for the payment processing giant. Visa (NYSE: V).

Buying a stock like Visa is like placing a bet where the numbers are strongly in your favor. Visa is a cyclical business, which means it performs well when the US and global economy is expanding. While recessions are inevitable, they are often measured in months, as economic expansions last for many years. It’s a numbers game, and the “buy Visa” bet has always been a winner.

Visa is also the primary payment facilitator in the United States. In 2018, it controlled more than 53% of the network’s purchasing volume by credit card. That’s an improvement of over 9 percentage points from the depths of the Great Recession.

Finally, investors should be aware that Visa is not a lender. By focusing solely on processing cashless transactions, Visa avoids the direct pain experienced during recessions and economic contractions when delinquencies increase. This is one of the main reasons why Visa’s profit margin is often 50% or more.

Palo Alto Networks

Even with an effective COVID-19 vaccine, traditional office environments or consumer buying habits will not revert to their pre-pandemic state. The business and retail world got a taste of online, cloud-centric convenience, and it’s here to stay. This is what makes a cybersecurity stock like Palo Alto Networks (NYSE: PANW) a staple in a Biden bull market.

Cloud protection has become a core service over the past few years, which means subscription-based providers (eg Palo Alto) can expect consistent and transparent revenue. The subscription model in the cybersecurity space also lowers the customer churn rate.

More specific to Palo Alto Networks, he is executing a business transformation that de-emphasizes physical firewall products in favor of subscription protection services. As you can imagine, this should lead to more consistent revenue recognition and significantly better margins in the long run.

Palo Alto has also not shied away from making targeted acquisitions to expand its product portfolio and attract more small and medium businesses. Sacrificing very short-term margins to gobble up a larger share of the cloud protection market should be a smart move.

Amazon

Did I mention how important consumption is to the US economy? With Biden likely to oversee economic rebound after coronavirus-induced recession, e-commerce giant Amazon (NASDAQ: AMZN) becomes an absolute must-have stock.

Consistent with the recurring theme of this list of market share domination, Amazon controls about 38.7% of online sales in the United States, according to eMarketer. Next year, that figure will rise to almost 40%. In some contexts, Amazon’s share of U.S. e-commerce is about 33 percentage points higher than that of its closest competitor. Even with small retail margins, the company’s marketplace keeps consumers loyal to the Amazon brand. It has also signed up over 150 million people worldwide for a Prime membership.

As I mentioned before, Amazon is expected to see rapid and continued growth in its cloud infrastructure segment, Amazon Web Services (AWS). AWS has recorded consecutive quarters of 29% year-over-year sales growth and has an annual sales rate of more than $ 46 billion. AWS has significantly higher margins than the retail and advertising-based revenue that Amazon reports. Like Intuitive Surgical, Amazon is expected to see its operational cash flow increase as the cloud infrastructure grows to a higher percentage of total sales.