Investors are probably questioning which stocks would do better in either a Biden or a Trump presidency. However, there is one more possible scenario, i.e., one where we do not know the definite result on the night of Nov. 3. So, it makes sense to look at the best election stocks to buy in case a winner in the Nov. 3 election isn’t immediately known.
Contested or drawn-out election results do not happen often. In recent history, we have the example of 2000. In fact, we’d need to look at elections from the 19th century. Therefore, the chances of not having a definite result soon is slim, but nonetheless possible.
Academic research highlights the difficulty of knowing where broader markets or individual stock prices may be in a few weeks.
For instance, a study by Brian Knight of the National Bureau of Economic Research has some details. “On the day following the U.S. Supreme Court ruling that guaranteed a victory for George Bush in the 2000 presidential election, several media reports noted the increase in prices of equities favored under Bush’s campaign platforms.”
For example, Pfizer (NYSE:PFE) jumped 4.1%, Exxon Mobil (NYSE:XOM) rose 1.3% and Philip Morris (NYSE:PM) rose 6.5%.
If you are looking for the best election stocks to buy should the result be contested or delayed, investors would be well-advised to consider exchange-traded funds, which by definition provide exposure to a basket of securities. As a result, investors will be better able to diversify across asset classes and decrease some of the risk due to the election result uncertainty.
These names may help investors stay invested when increased volatility may make them jittery and even cloud the decision-making process. Let’s take a closer look.
- Aptus Defined Risk ETF (CBOE:DRSK)
- iShares Silver Trust (NYSEARCA:SLV)
- Vanguard U.S. Multifactor Fund (CBOE:VFMV)
Election Stocks: Aptus Defined Risk ETF (DRSK)
52-week range: $25.28 – $32.02
Dividend yield: 0.8%
Expense ratio: 0.78%, or $78 annually per $10,000 invested
The Aptus Defined Risk ETF is an actively managed strategy whose objective is both income and growth through a hybrid fixed-income and equity approach. Fund managers invest around over 90% of assets in investment-grade corporate bonds. The rest is placed in long-term in-the-money (ITM) call options on a range of large-capitalization stocks within a diverse range of sectors.
Many market participants regularly buy bonds or bond ETFs. The asset class provides diversification as stocks and bonds are typically inversely correlated. Put another way, when stocks fall, bonds rise. In addition, call options owned by DRSK help capture a significant part of the up move in a bull market, The downside is limited to the amount invested in those options (i.e., the call premium).
For example, the fund currently owns call options on stocks including Apple (NASDAQ:AAPL), Adobe (NASDAQ:ADBE), Amazon (NASDAQ:AMZN), Bank of America (NYSE:BAC), Facebook (NASDAQ:FB), and Home Depot (NYSE:HD), among others.
So far in the year, the fund is up about 11%. DRSK deserves to be on your radar if you believe income generation is important in a low interest rate environment.
iShares Silver Trust (SLV)
52-week range: $10.86 – $27.39
Expense ratio: 0.5%
This year saw the prices of shiny metals silver and gold reach new record highs. Although short-term profit-taking has meant they have both come off their recent levels, long-term investors are still sitting on healthy profits. Silver and gold prices are $23.66 and $1,881, respectively.
In other words, the pandemic-induced volatility has catapulted both metals into safe haven status. Those investors who feel silver may have further room to run could consider investing in iShares Silver Trust. The fund provides exposure to the daily movement of the price of silver bullion. Year-to-date, SLV is up over 30%.
Why do we like silver as an investment in the last quarter of the year? Like gold, as a precious metal, it has a unique role in global markets. Throughout the centuries, billions of people have invested in silver in the form of bullion, coins, jewelry, or even utensils.
In addition to the election jitters, the record-low interest rates, continued federal stimulus, increased number of Covid-19 cases worldwide, a weaker U.S. dollar and tensions between the U.S. and China are likely to add support to the price of silver. In the short term, silver prices will possibly be choppy. However, in the long term, I remain bullish on the metal.
Vanguard U.S. Multifactor Fund (VFMV)
52-week range: $60.98 – $94.61
Dividend yield: 1.7%
Expense ratio: 0.13%
In financial markets, volatility is the measure of the change in price and the related risk of an asset over time. Over the past few trading days, it has been on the rise. Market professionals associate a market up move in volatility with an accompanying rise in risk or the fear factor.
The Vanguard U.S. Multifactor Fund invests in shares of 124 U.S.-based businesses in a wide range of market sectors and industry groups. A quantitative model helps fund managers select the basket of securities that they believe minimizes volatility relative to the broader market.
The benchmark index is the Russell 3000 index. VFMV’s top 10 holdings constitute over 17% of VFMV’s net assets of over $74 million. Software group MicroStrategy (NASDAQ:MSTR), diversified energy group Clearway Energy (NYSE:CWEN), and software giant Adobe head the list of businesses in the fund. Technology and health care sectors have the highest allocation, with a weighting of about 20% each.
Since the start of the year, VFMV is down about 12%. Its trailing price-earnings and price-book ratios stand at 26 and 3.7. If you are a contrarian value investor, you may want to put the fund on your shopping list for the final quarter of 2020. It may be an appropriate holding especially for long-term investors. I’d consider buying the dips.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.