Election 2024: Where To Put Your Money Ahead of the Vote

Dollar Tree “uniquely disadvantaged,” Trump presidency “net positive” for tobacco, say analysts

In this recurring series, The Fly recaps where the top analysts on Wall Street say to put your money ahead of November’s U.S. presidential election. In this edition, Alliance Global Partners considers the election’s impact in terms of cannabis reform and the Biden administration considers tougher trading curbs in chip crackdown on China.

IMPLICATIONS FROM SECOND TRUMP TERM: 

Baird on Wednesday commented on potential implications from a second Trump presidency, forecasting benefits for Ag/Hospitality/Food Processing, supply chain realignment, and Oil & Gas. The firm said labor is likely to get tighter and more expensive, and this will become a structural rather than cyclical dynamic driving automation, with Deere (DE), CNH Industrial (CNH), and Agco (AGCO) benefiting in Ag, and JBT Corp. (JBT) and Middleby (MIDD) in Food Processing and Hospitality. In addition, the firm said that the elimination of electric vehicle incentives and broader subsidies for clean energy is likely to have meaningful consequences, which is a negative for Lincoln Electric (LECO)and Illinois Tool Works (ITW), and would also have negative implications for United Rentals (URI), Herc Holdings (HRI) and equipment suppliers. Further, Baird argued that Trump would seek to end the temporary pause on LNG export permits, halt a pending EPA rule to charge oil & gas companies fees for methane emissions, improve the ability to drill onshore, and expand offshore oil & gas leases, and companies that would benefit from increased U.S. oil & gas activity include Caterpillar (CAT)and ESAB (ESAB). Meanwhile, the firm contended that Republicans would make permanent the provisions of the Trump Tax Cuts and Jobs Act, and lower regulations could benefit M&A, particularly serial acquirers like Parker-Hannifin (PH) and United Rentals.

TOUGHER TRADING CURBS: 

The Biden administration is considering a wide-sweeping crackdown to clamp down on companies exporting their chipmaking equipment to China if companies such as Tokyo Electron (TOELY) and ASML (ASML)continue giving the country access to advanced semiconductor technology, Bloomberg’s Mackenzie Hawkins, Ian King, Cagan Koc, and Takashi Mochizuki reported on Wednesday. According to people familiar with the matter, the U.S. is considering whether to impose a measure called the foreign direct product rule, which lets the country impose controls on foreign-made products that use even the tiniest amount of American technology. Publicly traded chip stocks include Nvidia (NVDA), Advanced Micro Devices (AMD), Intel (INTC), Qualcomm (QCOM), Marvel (MRVL), Texas Instruments (TXN), Micron (MU), Microchip (MCHP), and TSMC (TSM). 

Meanwhile, former president and current presidential candidate Donald Trump said Taiwan should pay the U.S. for defense, in an interview with Bloomberg Businessweek published on Tuesday. The former president also claimed Taiwan took “about 100%” of America’s semiconductor business.

TRUMP ‘NET POSITIVE’ FOR TOBACCO STOCKS: 

Jefferies on Tuesday said a Trump presidency would be a net positive for tobacco stocks, especially regarding U.S. market dynamics. The firm sees meaningful actions against illegal Chinese vape as arguably more likely under Trump, and also believes that there will be less appetite for pursuing rules for a menthol ban and non-addictive nicotine levels. While Biden delayed the expected menthol rule publication this year, Jefferies thinks this was politically driven given possible voting implications, and the firm expects it to be still introduced in 2025 should Democrats win the election. Under Trump, Jefferies doesn’t think there would be a strong desire to go down this route. Publicly traded companies in the tobacco products space include Altria Group (MO), British American Tobacco (BTI), Imperial Brands (IMBBY) and Philip Morris (PM).

DOLLAR TREE ‘UNIQUELY DISADVANTAGED’ INTO ELECTION: 

On Tuesday, Piper Sandler downgraded Dollar Tree (DLTR). The firm believes the company is “uniquely disadvantaged” irrespective of the outcome of the Presidential election due to potential tariffs under Trump’s administration or changes to the Overtime Rule under the Democrats’ regime. The firm highlighted that with tariffs appearing more likely, Dollar Tree shares have become challenging to own for anyone with a 12+ month time horizon and suggests that estimates for both 2024 and 2025 may still be too high. In the event of a Trump victory, Dollar Tree faces significant tariff exposure due to its largely fixed price selling model, while with a Democratic election, changes to the Overtime Rule, which would raise the minimum salary threshold for overtime eligibility to $58,000, could also have a significant impact on Dollar Tree’s EPS, Piper said.

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Originally Posted July 22, 2024 – Election 2024: Where To Put Your Money Ahead of the Vote