US elections: I’d buy this FTSE 100 stock if Biden wins

The FTSE 100 index stock that stands most to gain by a potential Democrats’ win in the US elections is this one. And there are other reasons to buy it too.

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The US economy will be dealing with the results of the country’s presidential elections in less than a month. It’s probably the single most important political event for global stock markets. Not only is the US economy the biggest economy, its financial markets are a force to reckon with. Even with the pandemic-related chaos we are witnessing right now, I reckon the FTSE 100 will react to the election’s outcome. 

Biden likely to win

According to The Economist and its regularly updated projections, it’s going to be a democratic sweep this November. Other media, including the BBC and CNN also believe that the polls are tilted towards the Democrats for now. For us the key question is this: What does it mean for the FTSE 100 index? Goldman Sachs says that a Biden win will prompt an upgrade in forecasts. Broadly speaking, it appears that Goldman is betting on huge government spending and job creation, which will more than make up for hits from higher taxes and increased regulation. 

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Higher growth means that financial markets in general will benefit, and that should mean better outcomes for stock markets around the world, including the FTSE 100 index. More specifically, I think companies with substantial US exposure can gain significantly. Not all sectors will benefit equally of course. But I think those in infrastructure can be big winners, because that’s where a big share of spending will be channeled. 

This company’s set to gain

One FTSE 100 infrastructure company with US presence is the Irish construction biggie CRH (LSE: CRH). Its share price is trading at all-time highs right now. It has already picked up sharply since the start of October, possibly on a combination of signs of global economic recovery, its link to the US economy, and speculation of a Biden win. More than a few FTSE 100 stocks I’ve covered recently have seen impressive run-ups and this keeps raising the question – how much further are they likely to rise?

In CRH’s case, the answer would be clearer than most now. I think the share price has further to go. Just consider its price-to-earnings (P/E) ratio of 12.3 times. Compared to many other high-performing FTSE 100 stocks, this is still fairly affordable. I also think that as far as macroeconomic factors go, I think better US growth is great just by itself, considering that more than half its revenues are sourced from the country. 

But in this case I think it’s also a good hedge against continued pandemic-related uncertainty in the UK and the rest of Europe. The UK is a small part of CRH’s revenues but the rest of Europe is around a fourth of the total, which isn’t a small slice of the top-line. Further, unlike many other FTSE 100 companies, CRH’s diversified revenues mean that it will remain largely untouched by Brexit. We don’t know how Brexit is going to turn out, but so far there’s little optimism on the outcome.  If things turn out well, it’s a double-win. Whichever way I look at it, CRH is a good stock to buy.  

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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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