Conti shares rated as a post-US election ‘buy’
With the 2020 US election shaping up to be the closest in the last two decades, no-one can yet say who will be the winning. However, share price analysts that are literally experts at hedging their bets, have compiled a list of post-Election share picks. In short, while growth is expected across the board in 2021, the recently-berated Goodyear is not the only tyre brand that would stand to gain from the end of Trump presidency.
Based on a “Green grass on either side of the fence” overall thesis, Jefferies analysts believe economic growth is on the horizon whoever wins the election. However, to cut a long story short, a Trump win would be good news for the insurance, banking and defence industries, while a Biden presidency would be good for industries such as mining, chemicals and automotive.
When it comes to the automotive industry, analysts Philippe Houchois, Sascha Gommel and Himanshu Agarwal suggest the Biden administration would be “pro electric vehicles and clean energy, although there isn’t any policy detail at this stage.” Their report, dated
4 November further states that a Trump win would “delay stricter CO2 regulation and reduce the risk of a ‘regulation-induced’ change in product mix that could shift demand to less profitable vehicles.” The ability to influence policy will depend on who achieves majority in the US congress. But individual US states could take the lead in emissions regulation, with California recently announcing a ban on internal combustion engine sales by 2035. For tyremakers and automotive suppliers this is expected to offer growth opportunities. And that’s where Continental AG comes in.
Stricter emissions regulation could affect tyre makers
“Regarding suppliers, a faster transition to electric vehicles could dilute short-term margins but offer content growth opportunities. More homogeneous regulation across regions could increase scale effects in the long term”, the analysts wrote, adding: “We note that most suppliers are localized in the NAFTA region, i.e., there is limited pressure to relocate production.”
Stricter emissions regulation could also affect tyre manufacturers and erode margins, the report continues. However, premium tyre manufacturers should “suffer less due to an electric vehicle-tailored product offering and better pricing power.”
Other automotive- and tyre industry-related share picks include Continental AG shareholder Schaeffler AG (rated hold) and chemical manufacturer and tyre industry supplier Solvay SA (rated buy). Indeed, as far as Solvay is concerned, the analysts wrote: “A Biden win will likely be a clear positive for…Solvay…due to a renewed focus on vehicle light-weighting (both cars and planes)”.