When the same political party controls the White House and both houses of Congress, as the Democrats now do, it can set the stage for dramatic action and legislation that can boost the stock prices of certain industries and companies but hurt others.  

All presidents can influence stock sectors through executive orders and actions that he/she issues to manage operations of the federal government, none of which requires Congressional approval. In his first three weeks in office, President Biden delivered 49 such directives that reversed many of former President Trump’s policies.

To help you figure out how the Blue Wave in Washington, DC, could affect your investments, Bottom Line Personal asked top stock picker and analyst Charles Lewis Sizemore, CFA, which areas of the market could be big winners and losers and which stocks are his favorites. 

Renewable Energy 

This is the sector in which the president and the Democrats could have the strongest influence. Renewable energy was already on an upswing before the 2020 elections, thanks to falling costs, improving technology and shifting consumer demand. The president plans to make US climate policy an engine for employment and economic growth. Biden’s “New Green Deal” calls for a nationwide emissions-free electricity grid in just 15 years through energy legislation, executive orders, incentives and subsidies that will benefit solar, wind and hydroelectric companies. My favorite renewable-­energy
stocks now…

Brookfield Renewable Partners (BEP) owns a portfolio of more than 5,000 renewable power–­generating properties including wind, solar and hydroelectric facilities across four continents. The company has projects in development that should nearly double its power-generating capacity. Recent share price: $45.22.*

NextEra Energy (NEE) provides electricity for 5.5 million customers in Florida. But it is best known as the world’s largest producer of wind and solar energy. NextEra, which has increased its annual dividend for 26 consecutive years, is so far ahead of its peers in converting fossil fuel–powered plants to cleaner energy sources that it should continue to deliver a double-digit compound annual growth rate in a sector known for low single-digit growth. Recent share price: $81.19.

Invesco Solar ETF (TAN). Many solar stocks have exhibited huge volatility in the past year. So I’d rather use an exchange-traded fund (ETF) to diversify and bet on a wide swath of them—all of which could benefit from renewable-energy legislation and wider consumer adoption of ­solar energy. Invesco Solar, launched in 2008, is the largest and oldest solar-focused ETF with more than $5.1 billion in assets. It holds 30 of the top companies including First Solar, the leading US solar-panel manufacturer, and Enphase Energy, which provides solar-energy software and systems for homeowners. Recent share price: $118.45.

Health Insurers

President Biden was a champion of the Affordable Care Act (ACA) as vice president. He intends to protect and expand the ACA by increasing tax credits to lower premiums and creating an option to buy a public health-insurance plan, similar to Medicare. That could dramatically increase the customer base of big health-care insurers. Just as important, the president has opposed extreme health-care reform such as a single-payer health-care system, which could eliminate private health insurance and replace it with a government-run program to provide insurance for all Americans. My ­favorite health-insurer stock now…

UnitedHealth Group (UNH) is the country’s largest private health insurer with nearly 50 million members in all 50 states. Selling Medicare Advantage plans has been a vital source of growth for the company. It has estimated that it ­ enrolled about 700,000 new Medicare customers in 2020. Recent share price: $324.62.

Marijuana

Although the federal law preventing the use or possession of marijuana for medical or recreational ­purposes is unlikely to fall anytime soon, incremental changes under the Democrats are likely to lead to a surge in cannabis stocks. ­President Biden has pledged to decriminalize marijuana, which will help legitimize it. That could lead to increased institutional ownership in these companies, which is currently quite limited. My favorite ­marijuana-related stock now…

Innovative Industrial Properties
(IIPR) invests in infrastructure supporting the cannabis economy. This real estate investment trust, which trades on the New York Stock Exchange, rents marijuana ­growing, distribution and manufacturing facilities to state-licensed medical cannabis operations. With about 67 properties across 17 states, the company plays an essential role in the industry. Recent share price: $218.48.

Infrastructure

One of Biden’s top campaign promises was a plan to spend $1.3 trillion over a 10-year period on infrastructure projects such as repairing highways and upgrading airports, railways and ports. Infrastructure improvement enjoys bipartisan support in Congress as a way to continue to help get the US economy back on its feet, and much of that spending would flow to US heavy-construction and materials companies. My favorite ­infrastructure stock now…

Martin Marietta Materials (MLM) sells $4 billion a year worth of aggregates—crushed stone, gravel and sand—widely used in construction work. It’s a primary beneficiary of new federal funding to rebuild the nation’s roads and bridges. The company’s ­geographic diversity, with operations in 27 states, gives it pricing ­advantages because shipping aggregate is expensive and shortening distances saves money. Recent share price: $325.65.

Areas to Avoid  

Big Tech. The pandemic helped bring stocks of many of the world’s technology giants to new heights in 2020. But these companies are in Washington’s crosshairs. President Biden supports modifying or revoking Section 230 of the Communications Decency Act, which provides Internet sites with legal immunity from liability even if users post illegal or false content. That has allowed companies such as Facebook, Twitter and YouTube to flourish.

Democratic senators are likely to press for legislative restrictions on issues such as privacy, data collection and mergers, all of which could hurt Big Tech profits. And last year, the US Justice Department and Federal Trade Commission filed ­antitrust lawsuits against Google and Facebook, threatening to break up these companies. 

Fossil-fuel companies. While oil and gas prices are rebounding from their pandemic lows and energy is, by far, the cheapest major sector in the stock market, Democrats are no friend of the industry. President Biden placed a temporary moratorium on oil and gas leasing in the Arctic and revoked approval for the Keystone XL pipeline, meant to ­carry crude oil to the US from ­Canada’s oil sands—among the most greenhouse-gas intensive energy in the world. Investors should ­expect more legislation and directives that will hurt fossil-fuel company profits, including stricter standards for carbon emissions. 

*Recent share prices as of market close on February 16, 2021.