The U.S. is approaching a pivotal election on Tuesday, Nov. 5 - and financial markets are becoming a battleground as investors bet on the tight race between former President Donald Trump and Vice President Kamala Harris. For investors hoping to position their portfolios to benefit from either election outcome, it's worth pointing out that both candidates share some surprising policy overlap. That said, their contrasting policy points — like Trump's pro-cryptocurrency stance, or Harris's middle-class focus — create some unique opportunities for investors, too.
Given the unpredictability of U.S. politics and the potential for macroeconomic surprises to impact policy, the best “election picks” are those that offer appeal outside of any expected policy perks. With this in mind, Barclays recently released its "election picks," and two stocks have emerged as particularly intriguing bipartisan options. Both have garnered "Strong Buy" ratings from analysts, and could be positioned to benefit no matter who takes the White House. Here's a closer look.
MicroStrategy Stock
MicroStrategy Inc. (MSTR), under Executive Chairman Michael Saylor's leadership, has transformed from a traditional business intelligence software company into a significant Bitcoin (BTCUSD) holder, attracting substantial investor attention. The upcoming U.S. presidential election could further boost MicroStrategy's prospects, particularly if Trump wins, says Barclays. His evolving stance on cryptocurrencies, particularly Bitcoin, includes promises to make the U.S. a "Bitcoin mining powerhouse" and create a strategic national Bitcoin stockpile, and could create a more favorable environment for BTC-focused companies like MicroStrategy.
Demonstrating its commitment to this strategy, MicroStrategy recently completed a $1.01 billion offering of convertible senior notes, planning to use the net proceeds of $997.4 million to redeem existing notes and acquire additional Bitcoin. The company currently holds 252,220 Bitcoins, acquired for $9.91 billion, averaging $39,292 per Bitcoin.
MSTR's aggressive Bitcoin acquisition strategy has propelled its stock to impressive heights in 2024, with MSTR up 169% YTD and 416% over the past 52 weeks.
MicroStrategy's market capitalization currently stands at $28.85 billion, reflecting the market's valuation of both its software business and substantial Bitcoin holdings.
While MicroStrategy's Bitcoin strategy has been successful, its core business faces challenges. Q2 2024 saw a 7.44% year-over-year revenue decline to $111.4 million, with a $0.74 loss per share. However, this was partially offset by a 21% increase in subscription revenue, driven by cloud migrations and new customer acquisitions.
The company's newly introduced "BTC Yield" metric stood at an impressive 12.2% year-to-date. MicroStrategy's liquidity position also improved over the first half of 2024. Looking ahead, MSTR is projecting an annual Bitcoin yield of 4-8% from 2025 to 2027.
The analyst community has taken notice of MicroStrategy's unique position. Barclays and Cantor Fitzgerald have recently initiated coverage with “Overweight” ratings, citing the company's strategic exposure to Bitcoin as a key factor. The overall consensus is overwhelmingly bullish, with all 8 analysts covering the stock recommending a “Strong Buy.” The mean target price of $202.88 suggests a potential upside of 19.3% from its current price.
Burlington Stores Stock
Burlington Stores Inc (BURL) has established itself as a leading off-price retailer, offering brand-name merchandise at discounted prices. With over 1,000 stores nationwide, Burlington caters to budget-conscious consumers seeking quality products at affordable prices.
Barclays notes that if VP Harris wins the upcoming election, it could be good news for BURL. Her plans to help the middle class, such as the proposed reinstatement of an expanded child tax credit of up to $3,600 per child, could increase disposable income, potentially driving increased spending at off-price retailers like Burlington.
That said, while some discount retailers are in dire straits, BURL stock is already outperforming without any policy help. Over the past 52 weeks, BURL has gained 98.5%, with a year-to-date gain of 35%. The retailer's market capitalization stands at $16.57 billion.
Burlington's forward adjusted price/earnings (P/E) ratio of 32.74 is higher than the sector median of 17.06, though the current valuation is right in line with BURL's historical averages.
BURL's recent financial results have justified this premium valuation. In its second-quarter earnings report, the company showcased strong performance, with total sales increasing by 13.4% year-over-year and comparable store sales jumping 5%. Adjusted earnings per share came in at $1.24, marking a 98% increase from the same quarter in the previous year and significantly beating analysts' expectations.
Following these robust results, Burlington raised its fiscal 2024 guidance. The company now expects total sales to increase by 9-10% for the full year, with comparable store sales growth in the range of 2-3%. For the full fiscal year 2024, Burlington has revised its adjusted EPS forecast upward to a range of $7.66-$7.96.
On the operational front, Burlington has been actively expanding its footprint. In Q2 2024, the company opened 36 net new stores, bringing its total to 1,057 locations. The retailer is on track to open approximately 100 net new stores in fiscal 2024, underscoring its commitment to strategic growth. Additionally, Burlington has been opportunistic in its expansion, acquiring 44 leases from the bankrupt Bed Bath & Beyond chain for $12 million, the largest share of the available leases.
Analysts see more upside ahead for outperforming BURL, with the mean target price of $305.00 indicating a potential upside of 16.6% from its current price. Based on 19 analysts offering recommendations, the consensus is overwhelmingly positive, with 17 suggesting a “Strong Buy” and 2 recommending a “Hold.”
Conclusion
As we wrap up our look at these two “Strong Buy” stocks, it's clear that both MicroStrategy and Burlington offer unique opportunities for investors looking to hedge their bets in the upcoming election. Both stocks have shown remarkable strength, with MicroStrategy's crypto pivot delivering solid returns and Burlington's steady growth impressing analysts. Ultimately, whether you're bullish on Bitcoin or betting on bargain hunters, both stocks offer interesting options to diversify your portfolio ahead of the election.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
