There’s no clear winner in the US elections so far. Joe Biden is in the lead, but a win for the Democrats isn’t guaranteed. Unsurprisingly, stock markets are underwhelmed. The FTSE 100 index, for instance, has risen less than 1% so far today. I think the point to note here is that uncertain politics leads to uncertain markets. This has been amply clear to FTSE 100 investors since the Brexit vote. The point is underlined yet again now.
How I’d invest now
For me, this means that index investing is a no-go. I reckon the FTSE 100 won’t go anywhere in the days and months to come. I’d rather buy FTSE 100 stocks that are immune to political confusion or a weak economy. Clearly, this seems to be a consensus among the investing community today. Three of the top five FTSE 100 gainers today are healthcare provider AstraZeneca, pharmaceuticals company Hikma Pharmaceuticals, and e-grocer Ocado.
FTSE 100 gainers
AstraZeneca has gained increased investor attention this year, since it began developing a Covid-19 vaccine. But even before that, it was a high-performing stock. Ideally, I’d wait for a dip before loading up on it, because its price has run up quite a bit. Similarly, Hikma Pharmaceuticals has signed an agreement with the US-based Gilead Sciences to manufacture its Covid-19 drug, Remdesivir. Compared to AstraZeneca, Hikma is affordable with an earnings ratio of less than 13 times, making it a good healthcare stock to buy.
Ocado’s share price increase to vertigo-inducing heights this year needs no introduction. As the convenience and safety of ordering supplies in catapulted demand for the online supermarket’s services to news highs, its share price followed suit. As the UK swings back into lockdown, Ocado will clearly continue to perform. Like AstraZeneca, its price may feel uncomfortably high too, but I don’t see it coming off meaningfully any time soon. Considering that there are no real FTSE 100 alternatives to the stock, I think now is a good time as any other to buy it.
Indirect FTSE 100 beneficiaries
Apart from Ocado, online retailers in general have outperformed in 2020. Amazon is the most prominent example of this trend, but it’s not a UK-listed company. There are, however, FTSE 100 companies that have benefited from the online shopping trend. Consider paper packaging provider Smurfit Kappa. It’s also one of the biggest gainers today, following its trading update. It reported better than expected performance.
There’s of course a possibility that as the recession makes a comeback, consumer spending will weaken enough to impact e-commerce sales. This, in turn, will impact the likes of Smurfit Kappa. However, if and how much the effect will be remains to be seen. I think this is another FTSE 100 stock to buy today. Alternatively, I’d consider its FTSE 100 peer DS Smith. Irrespective of the outcome of the US elections or any other political (non) triggers, I reckon these stocks will continue to be good buys.
