Stocks had a strong reaction to the final outcome of the 2020 elections and runoffs. They actually closed at all-time highs on the news.
Not bad for the overall markets, but when you dig into specific sectors, the gains really jump out at you. Some sectors moved up 5%, 6%, and even 15% as tracked by ETFs.
I’m sure we all remember the massive rally we got after the 2016 election.
A power shift in Washington, D.C., usually translates into market movements. That same history shows us some sectors will be more bullish than others under the new administration.
The trick is to get your investing and trading lined up with those movements. That way you can rake in gains again and again. This will make it easy…
The Profits Are Just Warming Up in These Two Sectors
There’s no doubt in my mind: Clean energy and healthcare are two places every investor needs to be right now – and for the foreseeable future. The incoming administration and Congress have more or less said as much with the policy announcements they’ve made.
Both of these sectors have been a big “uptrend” since November, and they came up an impressive combined 8% or more once the runoff results were in.
The two gave back a little of those gains in the meantime, but they quickly found support and bounced back toward early January’s highs.
Now, if you’ve been following along, you’ve had the chance to benefit from some bullish recommendations I’ve made in green energy. This past fall, I showed you how NextEra Energy Inc. (NYSE: NEE), a company with a huge renewables component, de-throned ExxonMobil Corp. (NYSE: XOM) as the world’s most valuable energy company.
And that’s really representative of what so-called “alternative” energy stocks have been doing. The intense political focus on renewables and clean energy will only get more concentrated over the coming months and years. That makes this a “must have.”
You could play the iShares Global Clean Energy ETF (NASDAQ: ICLN) (I’ll show you how in a minute) or any or all of the top companies the ETF tracks, like…
Plug Power Inc. (NASDAQ: PLUG), an American company that develops hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity. This stock is maybe the star performer of ICLNs holdings, making up a whopping 8.6% of the total. The stock itself has come up as high as 307% series of ultra high-volume gaps since the election. It’s trading just off last week’s all-time highs, consolidating for more upside. Jump on this quickly.
Enphase Energy Inc. (NASDAQ: ENPH) is in a different segment of the clean sector – it designs and manufactures software-driven home energy solutions that span solar generation, home energy storage, and web-based monitoring and control. Huge volume sent this company on a 104% ride; it actually hit an all-time high of $213 on Jan. 7 before pulling back a bit. Like PLUG, these shares are gathering strength for another run up on what will likely be lots of policy changes.
Yes, some of these companies have come up by triple digits, but this really is just for starters. And besides, like you’ll see in a second, you don’t need a stock to move triple digits to make money.
Healthcare is going to be one of the other beneficiaries of the incoming administration. This sector is going to help turn the tide of the coronavirus pandemic, sure, but Democratic policy priorities also look bullish.
The Health Care Select Sector SPDR ETF (NYSEArca: XLV) tracks pharmaceuticals, medical equipment and technology, biotech, and a lot more. This ETF dropped steeply between late October and the election, but then it took off like a shot; it’s still up 15% or more since then.
AmeriSource Bergen Corp. (NYSE: ABC) is one of XLV’s top holdings; it’s one of the world’s biggest drug wholesalers in the mega-markets of North America. It’s another story of “big volume, big gains.” ABC isn’t far at all from its all-time highs, and I think once it cracks $110 again, the sky’s the limit.
How to Make Money on Healthcare and Green Energy
Profiting from these stocks couldn’t be easier; some beginner’s option strategies are just the thing.
You could buy XLV, for instance, or PLUG, or ICLN outright, and ride them higher for the next couple of years, that’s true. As I said, some have come up much more than 100%, but the flood of money that comes with policy changes in D.C. makes more profits likely.
But there’s also a less expensive, lower-risk way to go here, straight from “Options 101.” I’m talking about simple call options.
Presidents always go all-out to cement that all-important “First Hundred Days” legacy, which usually involves lots of spending. I think the smart move here is to buy calls on any or all of the stocks you’d like to own in the sectors I’ve just mentioned. Set three- to six-month targets on everything, and get ready to make money.
Look, I’m clearly bullish on healthcare and clean energy; the writing’s on the wall.
— Tom Gentile
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Source: Money Morning