The U.S. presidential election is right around the corner, and many investors would be wondering which stocks could benefit most, based on who will become the next president.
But basing your investment decisions on election results isn’t a surefire recipe for success. And if you’re investing for the long haul, even a four-year presidential term could conceivably be considered short-term in the grand scheme of things.
Supercharged growth stocksSuper Micro Computer (NASDAQ: SMCI), MicroStrategy (NASDAQ: MSTR), and Viking Therapeutics(NASDAQ: VKTX) have all outperformed artificial intelligence (AI) giant Nvidia since the last election. The three stocks have returned 1,940%, 1,160%, and 1,040%, respectively, since Nov. 3, 2020, dwarfing the semiconductor giant’s not-too-shabby 960% stock return.
And undoubtedly, it would have been difficult, if not impossible, to forecast at the time that they would have soared as much as they have.
Tech company Super Micro Computer, which also goes by just Supermicro, didn’t show up on many growth investors’ radars until the past couple of years. It makes servers and provides businesses with IT infrastructure that can be critical in helping companies develop AI models.
While its business has been booming in recent years, that wasn’t because of Biden’s election win. The growth had more to do with the surge in AI-related spending, due to the emergence of ChatGPT and all the hype that came with the chatbot. Although the business was growing prior to that, Supermicro’s top line took off at a much more rapid pace in just the past two years.
Today, Supermicro still potentially makes for a good AI stock to own, but the big question mark I have about the business relates to its thin margins. If it can strengthen its gross profits, then combined with the fantastic growth prospects it possesses, Supermicro can remain a hot buy, and prove its short-sellers wrong in the process.
Another stock that’s benefiting from AI-fueled hype is MicroStrategy. The company provides companies with business intelligence solutions and utilizes AI. But it started rallying earlier than the stocks on this list, and that’s due to its exposure to Bitcoin. MicroStrategy prides itself on being the largest corporate holder of Bitcoins, which means as the price of Bitcoin rose, so too did MicroStrategy’s valuation.
In 2021, meme stocks and crypto were hot investing themes, and unsurprisingly, MicroStrategy’s stock also soared. But while Bitcoin has rallied significantly since the last election, MicroStrategy has generated superior gains, and that could be due to the added excitement AI has injected into the tech stock recently.
MicroStrategy’s results haven’t been all that impressive, however. The company has struggled with generating consistent revenue growth and any boost its business will get from AI remains questionable at this stage. This is one of the riskier stocks to own and it’s more of a crypto play than anything else. MicroStrategy has incurred a net loss in three of its past four quarters.
The smallest gain on this list comes from healthcare company Viking Therapeutics. And like the other stocks listed here, its gains have had little if anything to do with who won the last election. Instead, it has been the company’s promising weight loss drug that has lit a fire under Viking’s valuation.
Investors are bullish on the company’s obesity drug, VK2735, which has demonstrated encouraging results in clinical trials in helping people lose weight. In a recent phase 2 trial, participants lost around 15% of their weight after using the drug for 13 weeks. It’s progressing on to phase 3 and the company also has an oral version of the drug, which is entering phase 2 trials.
Viking doesn’t have an approved product just yet but the hope is that if VK2735 obtains approval from regulators, the company could be a big player in the anti-obesity market, which could be worth $200 billion by 2031.
The stock isn’t a suitable investment for all investors given the risk involved, but with a market cap of just over $7 billion, Viking has the potential for more gains in the future if VK2735 ends up coming to market.
To reiterate, elections, or any political event for that matter, don’t drive stocks in the long run. What matters eventually is the quality of the underlying business and its prospects. The three stocks mentioned above outperformed the stock market favorite, Nvidia, indicating how the market prices future growth prospects pretty accurately over the long run.
To quote Ben Graham, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” So investors would be better off doing due diligence on stocks than speculate how different presidential administrations could affect them over the short term.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.
