Change is coming to Washington. Earlier this month, Americans went to their local polling booths or sent their ballots and elected Democratic Party challenger Joe Biden as the 46th President of the United States.
In general, a new president, especially one from the opposite political party for a sitting president, would suggest that major changes are imminent. But it may not turn out. With more than a 50-50 probability that the Senate will remain under Republican control after two run-off elections in Georgia, lattice locks in Congress will lead to a continuation of the status quo on Capitol Hill. This would mean no increases in corporate, individual or capital gains.
A Biden presidency will also increase the likelihood of a second round of federal stimulus being passed. When combined with the Federal Reserve̵
As Wall Street is potentially ready for success, here are five growth stocks you should strongly consider buying for a Biden bull market.
If you like making money, you would like fintech stocks Square (NYSE: SQ) with Biden in the White House. Even after the coronavirus disease 2019 (COVID-19) pandemic is well placed in hindsight, the push toward cashless payments and peer-to-peer digital transactions will not ebb.
Most are familiar with Square’s sales ecosystem. This is what provides outlets and analytics tools to businesses. For much of its existence, Square has focused predominantly on processing small business transactions. However, in recent quarters, the percentage of gross payment volume from medium-sized and large companies has grown significantly. Since this is a trade-based fee-based segment, it can be quite lucrative to attract retailers with larger volumes in an expanding economy.
Square’s second operating segment is the digital payment platform Cash App. Since the end of 2017, the Cash App’s monthly active number of users has catapulted from 7 million to 30 million. Business fees are helping the Cash App grow, but the company’s bitcoin exchange and investments are driving Cash Apps’ revenue potential through the roof. It is not excluded that Square’s sales more than doubled under Biden.
Edge cloud computing service provider Quickly (NYSE: FSLY) has taken a lot of flak in recent weeks for the top customer TikTok, which significantly mates back on the use of Fastly’s content and security solutions in the third quarter. After all, TikTok was responsible for 12% of Fastly’s sales in the first half. But look beyond this quarter hiccup, and investors will like what they see.
When life returns to normal, the new will usually consist of consumers who favor e-commerce for their shopping needs and the Internet for their content consumption. This is excellent news for Fastly, who has fired on all cylinders, even without the TikTok in the corner. Its perceived to be malignant third quarter included the addition of 96 new customers and saw an increase in average business customer spending of $ 37,000 from the sequential third quarter.
Even better is the success of Fastly’s business model based on increased use from existing customers. In the third quarter, the company’s dollar-based net expansion hit 147%, a 10 percentage point increase from the sequential second quarter. It has become very clear that Fastly is a preferred edge cloud platform, and it would not surprise me if the company’s sales potentially tripled with Biden in the White House.
Another growth stock that appears to be a sure winner under Biden is the social media platform Pinterest (NYSE: PINS), who happens to be a customer of Fastly.
While most social platforms eventually hit a user growth ceiling, Pinterest has been busy breaking through these barriers. It ended the September quarter with 442 million monthly active users (MAU) and grew its MAU number by 30% on a compound annual basis in the three years to 2020.
Although it has received a COVID-19 boost with people stuck at home, Pinterest has shown years of sustainable MAU growth, especially in international markets. These ex-US countries will give the company its greatest ad-based growth potential this decade.
Pinterest is also a budding e-commerce game. Its users willingly publish the products, services and sites that interest them, making it exceptionally easy for Pinterest to act as the bridge and connect those users with small businesses that meet their desires. All Pinterest needs to do is keep its users engaged to keep growing fast. (Hint: It uses more video.)
Do not forget specialized drug manufacturers with Biden as president, because a divided congress means little chance of health care reform or setbacks in drug prices by brand name. That’s all good news Vertex Pharmaceuticals (NASDAQ: VRTX).
Vertex’s allure is tied to its success as a developer of cystic fibrosis (CF) treatments. Although CF does not have a cure, the therapies that Vertex develops improve patients’ quality of life. What really stands out is Trikafta, the newly approved combination treatment that took virtually no time to become Vertex’s best-selling CF treatment. Trikafta was responsible for $ 960 million of $ 1.54 billion in 3rd quarter net product sales, meaning it looks well on its way to peaking at $ 6 billion in maximum annual sales in short order.
But there are reasons to be excited beyond CF. Vertex’s pipeline consists of clinical candidates for the treatment of beta-thalassemia, sickle cell anemia, pain, alpha-1 antitrypsin deficiency and APOL1-mediated renal disease. While not all of these indications will necessarily bear fruit, Vertex’s drug development record speaks for itself and offers plenty of hope for both patients and investors.
Investors would also be wise to buy cybersecurity stocks like Okta (NASDAQ: OKTA) to a Biden bull market. Octa’s cloud-native identity verification solutions rely on artificial intelligence, which means they’re getting smarter about detecting threats all the time.
As noted, the new normal after the pandemic will still include a lot of online purchases as well as workers who want remote data access. The physical office will not disappear, but it will continue to evolve to suit the needs of the workers. This means even greater cloud demand and a continuous need to protect business and customer data. In other words, cybersecurity stocks like Okta provide a basic need service, which should lead to very predictable cash flow.
A key point in the Okta investment dissertation is that virtually the entire company’s revenue (approximately 95%) comes from subscriptions. Subscriptions are a much higher margin for generating cybersecurity revenue than physical firewall products. It also does not hurt that subscriptions tend to reduce client settlement and eliminate lump of revenue associated with physical security products.
As Octa’s customer numbers grow and its existing customers expand the number of required security solutions, operating margins must increase.