https://www.barrons.com/articles/five-stock-surprises-after-election-day-51604514505
Five Stock Surprises After Election Day
Nov. 4, 2020 1:28 pm ET
Courtesy Lordstown Motor
The market seems to be coalescing around a Biden presidency, a Republican-controlled Senate, and a Democratic House of Representatives.
Former Vice President Biden can hit 270 electoral college votes—the minimum needed for victory—if he wins three states where he maintains a narrow lead—Wisconsin, Michigan, and Nevada.
Whatever the outcome, it isn't the Blue Wave that was forecast. It isn't GOP-domination either. Stocks are up anyway—a lot. The S&P 500 is up 3.2% and the Dow Jones Industrial Average has gained 2.6%. Still, some stock moves are surprising Barron's, based on all the election reaction research we read leading up to election night.
Here are five postelection Day surprises:
Lordstown Motors (ticker: LMC) stock is up 8.2% in midday trading. All EV stocks, in fact, are having a pretty good day. NIO (NIO) and Hyliion Holdings (HYLN) shares, for instance, are up 11% and 6%, respectively.
Biden's policies are widely seen as positive for electric vehicle stocks. He plans to invest in EV infrastructure. But federal dollars are easier to come by with a Blue Wave. What's more, stock in NextEra Energy (NEE), the largest wind power producer in the U.S., is down 2.8% Wednesday because, presumably, there is no Blue Wave. First Solar (FLSR) shares, another large U.S. green energy play, are down too, by almost 10%.
EV stocks managed to buck the renewable energy trend. But Tesla (TSLA) shares aren't moving. That is also a little surprising, giving what's happening to the smaller-capitalization EV names.
Caterpillar (CAT) stock is down almost 7%. Caterpillar benefits from higher level of infrastructure and construction spending, but it wasn't included in many "infrastructure baskets" in pre-election research reports. Still, machinery stocks are taking it on the chin. Terex (TEX) and United Rentals (URI) shares are down 8% and 6.5%, respectively.
"Cat ran up on the infrastructure trade," one veteran trader tells Barron's. Now that trade is unwinding, and we find the magnitude of the move a little surprising.
The defense sector's reaction surprises us, too. Lockheed Martin (LMT) stock is up 4.7% in midday trading Wednesday. Defense industry stock analysts wrote that the defense industry was "in a funk" and had a "Biden problem," fearing that military spending might get cut to fund economic stimulus and manage ballooning government debt.
Citigroup analyst Jonathan Raviv said Wednesday he expected a Trump-bump for sector stocks—if President Donald Trump wins a second term—adding he expected a Trump rally to fade. For him, there is too much uncertainty over funding, no matter who wins.
Defense stocks are up anyway. "Overall, we think the Trump good/Biden bad defense trade is overstated since the underlying factors don't change much," added Raviv in a Wednesday research report. Looks like Raviv is right.
CoreCivic
CoreCivic (CXW) is a private company running public prisons. Shares are down almost 17% in Wednesday trading. Public prisons, apparently, won't far well under a Biden presidency. This is a surprise simply because it isn't on many shareholders' radars.
Few expected wild swings in Eastman Kodak (KODK) either. It's another small company investors weren't focused on going into the election. But shares traded up almost 10% in premarket trading, opened up more than 5%, dropped into the red in the morning, and now are up about 1.5% in midday trading.
Kodak's price action is a surprise because, like CoreCivic, no one was talking about Kodak. A Trump victory, presumably, will be a big positive. In July, Kodak and the Trump administration agreed to a $765 million loan to help Kodak build a drug ingredient business in the U.S. But that process was put on hold by the government agency responsible for dispersing the loan, after Democrats raised questions about unusual stock trading before the deal was disclosed to the public.
Even with all the volatility and uncertainty, Kodak stock is still up 56% year to date, better than comparable returns of the S&P 500 and Dow Jones Industrial Average.