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.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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. 

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.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Here’s what dividend forecasts could do for the BP share price in the next three years

I can understand why the BP share price is low, as oil's increasingly seen as evil. But BP's a cash…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

This FTSE 100 Dividend Aristocrat is on sale now

Stephen Wright thinks Croda International’s impressive dividend record means it could be the best FTSE 100 stock to add to…

Read more »

Investing Articles

3 shares I’d buy for passive income if I was retiring early

Roland Head profiles three FTSE 350 dividend shares he’d like to buy for their passive income to support an early…

Read more »

Investing Articles

Here’s how many Aviva shares I’d need for £1,000 a year in passive income

Our writer has been buying shares of this FTSE 100 insurer, but how many would he need to aim for…

Read more »

Female Doctor In White Coat Having Meeting With Woman Patient In Office
Investing Articles

1 incredible growth stock I can’t find on the FTSE 100

The FTSE 100 offers us a lot of interesting investment opportunities, but there's not much in the way of traditional…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With an £8K lump sum, I could create an annual second income worth £5,347

This Fool explains how a second income is achievable by using a lump sum, investing in stocks, and the magic…

Read more »

Investing Articles

Here’s what dividend forecasts could do for the BT share price in the next 3 years

With the BT share price down so low, the dividend looks very nice indeed. The company's debt is off-putting, though.…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

28% revenue growth per year and down over 20% in price! Should I invest in this niche FTSE 250 company?

Oliver says this FTSE 250 company has done an excellent job bringing auctioning into the modern world. Will he invest…

Read more »