Gregory Bergman
Editor-in-chief, CapitalWatch
Well, “Th-th-th-that’s all folks.”
Not entirely, of course, as Trump vowed to be “back in some form or another,” a characteristically opaque, but nevertheless ominous pledge. The Trump movement will likely metastasize, not disappear. Still, let us celebrate the end of this tumultuous and treasonous reality-show-presidency and, in so doing, highlight some future stock market stars set to rise during the next administration—an administration we hope makes for unbearably dull television.
Stay tuned for what will be a boring episodic filled with in-depth but uneventful press conferences, lame photo ops, and corny unifying sentiments—all set against the backdrop of the dissipating coronavirus, a growing economy, a reemergence on the world stage, and a bullish equities market.
Indeed, the thought of President Biden signing executive orders in a rocking chair, seemingly half-asleep, is an image that— in the aftermath of his predecessor— I cannot help but find comforting. But boring doesn’t mean unambitious. In fact, being boring might be exactly what is required to tackle the laundry list of problems Biden inherits. In an interview with The Atlantic this week, former defense secretary, CIA director, and White House chief of staff, Leon Panetta said: "A rational, experienced president is going to be very, very boring.”
We Now Return to Our Regularly Scheduled Programming…
We’re off to a good start if we are looking for a return to our traditionally dull political programming. To wit: the most exciting thing to happen in the Biden administration thus far was a poetry recital. So, wrap yourself in a warm blanket (and a mandatory mask), and revisit some of these anti-Tesla, positively dull equities.
1) CVS Health (NYSE: CVS)
CVS Health may be one of the worst places in the world. But while those fluorescent lights induce an immediate headache, conveniently the pharmacy offers customers—and aspiring investors—a long-term dividend-producing stock. It is true that Amazon (Nasdaq: AMZN)—the buy of all buys—unsettled CVS investors in 2019 when it started to tread on CVS’ territory, but CVS came back as fast as a seasonal case of eczema (for which CVS is my go-to place). The debt load, too, worried investors. The stock has been on an up and down rollercoaster since 2019 but started to launch what I believe will be a sustainable recovery in the second half of 2020. While Amazon still poses a threat (to nearly every industry), until Bezos can deliver same-day medicines, CVS will remain a place to go to get your prescription filled—and buy a bunch of other stuff, most of which you do not need, while you’re at it.
2) Fluor Corporation (NYSE: FLR)
Infrastructure is not the most exciting thing in the world—until a bridge collapse, anyway. Even Trump supposedly wanted to pass a massive infrastructure bill, though he never got around to it. Bold infrastructure spending legislation is one of the few things that will pass on a bipartisan basis during this administration. (Dems still need 10 Republican Senators to pass major legislative overhauls). Our infrastructure is wildly outdated, and when such a bill is indeed passed, companies like Fluor stand to benefit.
Fluor provides engineering, procurement, construction, and fabrication services to end-market customers in energy, chemicals, mining, metals, and transportation. The $2.84 billion company landed a government contract last year for the nationwide deactivation, decommission, and removal of selected nuclear facilities. As Biden tries to move to cleaner energy solutions (although I think nuclear energy should be part of the energy equation here), the anti-nuclear trend will continue. The stock has gone from trading sideways to exploding over 25% in price year-to-date. The stock has fallen a buck or so from Thursday’s high of $21.25 per share; I would wait to see if it falls under $20 per share and then pick it up. If it doesn’t, but instead rises above $21.50, pick it up and hold until these decades long-discussed infrastructure projects finally break ground.
3) IBM (NYSE: IBM)
International Business Machines Corporation. Even IBM’s name seems about as old-fashioned as it gets, so much so that Intel sounds like a company of the future by comparison. This company has done it all since its inception in 1911—from developing cheese slicers for butcheries to producing tabulation machines used to help track Social Security recipients and, rather shamefully, track Jews for the Nazis. But its long and partially hideous history aside, the Armonk, New York-headquartered company has more than 350,000 employees serving 170 countries. And finally, like Intel and some other so-called dinosaurs, it has seen the light at the end of the tunnel—a light illuminated by the cloud.
IBM’s acquisition of Red Hat is a key part of the goliath’s push into cloud computing for large enterprises. IMB has invested a ton in Kubernetes, a container-based cloud protocol that enables unprecedented scale and efficiency. Management, it seems, has finally come to accept and understand where the future lies—and how to change investors’ negative view of this long stagnating giant.
But while the company may finally heed the advice of the cloud-focused oracle, and plans to spin off its flailing IT services business in 2021 in an effort to focus on its “hybrid cloud” business of the “New IBM,” the aptly named Oracle Corporation (ORC), another snoozer stock, is a better bet. While IBM trades even more cheaply at 10 times earnings to Oracle’s 15, Oracle’s revenue has risen year-over-year for two straight quarters, while IBM’s revenue has fallen for three straight quarters. However, considering the forward dividend difference of 1.5% for Oracle and 5.3% for IBM, I would buy both these stocks and hold for a minimum 12 months.
4) Canadian Solar (Nasdaq: CSIQ)
Solar power might not seem boring, but at this point in history it is—or rather it should be. We should not be, as the globe turns hotter by the day, talking about surging industry growth in the next five years for what should have long come to pass. But here we are, and even if Biden can’t pass an AOC-level Green New Deal, the sun will shine on the solar industry over the next half-decade. My favorite in this space is Canadian Solar, whose P/E ratio is less obscene than its peers'.
The Ontario-headquartered company conducts a chunk of its business in China and Southeast Asia. In China, Beijing has renewed solar subsidies to 92.36 billion yuan ($13 billion) in 2020, which is nearly 8% higher from last year. Also, Canadian Solar also has several offices in the U.S. While the stock jumped this year on Biden’s ascension (along with its solar peers), Canadian Solar should yield significant returns this year and beyond.
5) Mastercard (NYSE: MA)
The exciting plays, like Square (NYSE: SQ) and PayPal (Nasdaq: PYPL), are the finance-related plays of the future, no doubt. And these are two stocks worth buying, especially Square, which has dipped recently. But if there was an old, boring player in the payment processing space to buy, it is Mastercard.
A $354 billion market cap company, Mastercard has avoided becoming a lender— a strategic decision which has its upsides. A safe and boring strategy—but playing it safe with payment processing means that Mastercard is protected from direct exposure to inevitable recessions. To bet on the company is to basically bet on the increase in GDP and the prospects of an economic recovery. A dovish monetary policy signaled by the Fed will also fuel spending—spending from which Mastercard will undoubtedly benefit.
Citing a “rare stretch of underperformance,” Jefferies analyst Trevor Williams raised his Mastercard target to $415 from $315. He also likes Visa (NYSE: V), rising its target to $250 from $195.
Buy them both as Americans begin to get out and see the world again. A world that we hope is even more exciting than we remember it—but not in weird way.
CapitalWatch Disclaimer
CapitalWatch has no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only and does not constitute financial, legal, or investment advice.
Gregory Bergman
Editor-in-chief, CapitalWatch
