Change is coming to Washington in less than eight weeks. On Jan. 20, Joe Biden will be sworn in as the 46th President of the United States. As outlined in recent days, Biden plans to quickly tackle the coronavirus disease 2019 (COVID-19) response, as well as roll back a number of environmental measures put in place by outgoing President Donald Trump.
But for investors, a Biden presidency likely means more of the same — and that’s a great thing for Wall Street. A potentially divided Congress makes it unlikely that corporate tax rates will increase anytime soon, which means higher earnings potential for publicly traded companies. With the Federal Reserve also continuing its dovish monetary policy, the stage is set for the young bull market to flourish under Biden’s leadership.
In particular, it could be time for value stocks to thrive. A Bank of America/Merrill Lynch report from 2016 that examined the performance of growth stocks versus value stocks over a 90-year period (1926-2015) found that value stocks outperformed growth stocks on an annualized basis (17% vs. 12.6%). Value stocks also outperformed growth stocks during periods of economic expansion.
With this being said, here are five perfect value stocks to buy for a Biden bull market.
It’s been a rough past two weeks for pharmacy giant CVS Health (NYSE:CVS), with Amazon.com announcing that it will enter the prescription space. This has depressed valuations for generally low-margin pharmacy chains across the board. But with little chance of major healthcare reforms working their way through the pipeline with Biden in the White House, CVS Health appears well-positioned to ward off Amazon’s attack.
You see, CVS Health thought outside the box in 2018 when it acquired health-benefits provider Aetna. The deal, which had folks scratching their heads initially, is going to boost CVS’ organic growth rate, result in substantial cost synergies, and will entice over 20 million Aetna members to stay within the CVS Health network umbrella of products and services. Having moved beyond retail will be key to CVS Health’s long-term growth.
CVS Health is also planning to open 1,500 HealthHUB health clinics nationwide. These specialized care clinics are designed to connect patients that have chronic illnesses with physicians. More importantly, they’ll serve as a grassroots engagement point between CVS and potential repeat customers.
In short, CVS Health should do very well during a Biden presidency.