The US presidential election is just around the corner, and many investors would be wondering which stocks could benefit the most depending on who will become the next president.
But basing your investment decisions on election results is not a foolproof recipe for success. And if you’re investing for the long term, even a four-year presidential term can be considered short-term in the grand scheme of things.
Supercharged growth stocks Super microcomputer (NASDAQ: SMCI), MicroStrategy (NASDAQ:MSTR)And Viking therapies(NASDAQ: VKTX) have all outperformed the artificial intelligence (AI) giant Nvidia since the last elections. The three stocks have returned 1,940%, 1,160% and 1,040% respectively since November 3, 2020, dwarfing the semiconductor giant’s not-too-shabby stock return of 960%.
And it would undoubtedly have been difficult, if not impossible, to predict at the time that they would have risen as much as they do now.
Technology company Super Micro Computer, also known as Supermicro, did not appear on the radars of many growth investors until recent years. It creates servers and provides companies with IT infrastructure that can be crucial in helping companies develop AI models.
Although business has boomed in recent years, it was not because of Biden’s election victory. The growth had more to do with the increase in AI-related spending, due to the rise of ChatGPT and all the hype that came with the chatbot. Although the company was already growing before that, Supermicro’s revenue increased much faster in the past two years.
Today, Supermicro is still potentially a good AI stock to own, but the big question mark I have about the company has to do with its thin margins. If it can strengthen its gross profit, coupled with the fantastic growth prospects it possesses, Supermicro can remain a good buy and prove its short sellers wrong in the process.
Another stock benefiting from the AI-driven hype is MicroStrategy. The company offers companies business intelligence solutions and uses AI. But it started rising earlier than the stocks on this list, and that’s because of its exposure to Bitcoin. MicroStrategy prides itself on being the largest corporate holder of Bitcoins, meaning that as the price of Bitcoin rose, so did MicroStrategy’s valuation.
In 2021, meme stocks and crypto were hot investment themes, and unsurprisingly, MicroStrategy shares also soared. But while Bitcoin has risen significantly since the last election, MicroStrategy has generated superior profits, and that could be due to the extra excitement AI has recently injected into the tech stocks.
MSTR data by YCharts.
However, MicroStrategy’s results were not as impressive. The company has struggled to generate consistent revenue growth and any boost AI will bring to its business 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 posted a net loss in three of the last four quarters.
The smallest profit on this list comes from healthcare company Viking Therapeutics. And like the other stocks mentioned here, its gains have had little or nothing to do with who won the last election. Instead, it’s 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 shown encouraging results in helping people lose weight in clinical trials. In a recent Phase 2 study, participants lost approximately 15% of their weight after thirteen weeks of taking the drug. It’s moving on to Phase 3, and the company also has an oral version of the drug, which is entering Phase 2 trials.
Viking does not yet have an approved product, but the hope is that if VK2735 wins approval from regulators, the company could become a major player in the anti-obesity market, which could be worth $200 billion by 2031.
The stock is not a suitable investment for all investors given the risk involved, but with a market capitalization of just over $7 billion, Viking has the potential for more gains in the future if VK2735 comes to market.
I repeat: elections, or any political event for that matter, do not determine long-term stock prices. What ultimately matters is the quality of the underlying company and its prospects. The three stocks mentioned above outperformed Nvidia, a stock market favorite, indicating that the market is assessing its future long-term growth prospects quite accurately.
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 rather than speculating on how different presidential administrations might affect them in the short term.
Consider the following before buying shares in Super Micro Computer:
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David Jagielski has no position in the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.
3 Growth Stocks That Have Generated 1,000% Returns Since the Last Presidential Election (And They’ve All Outperformed Nvidia) was originally published by The Motley Fool
