The Midterm Election

As mentioned in the prior post, I thought the recent Trump tweets about progress with Xi were an attempt to goose the market ahead of the midterms next Tuesday.

Most likely the House of Representatives flips to being Democrat controlled. If it does, pharma stocks are likely to get beaten up as hard-left outsiders call out Trump’s lack of progress on healthcare pricing reforms – nevermind that the New York Times about a year ago published a garbage article promoting healthcare McJobs as a vital jobs engine. That awful logic was debunked by Frederick Bastiat in 1850, but partisan hackery has no need for facts!

Here is a quick blurb from Reuters

Policy efforts to lower prescription drug prices that have started under Trump could get more attention should Democrats gain control in Congress.

Democratic gains in particular could lead investors to anticipate expanded coverage or other changes related to the Affordable Care Act, possibly benefiting some insurer company and hospital shares.

AbbVie beat expectations and boosted their dividend from $0.96 to $1.07, but they also recently lowered Humira pricing by 80% in Europe over biosimilars.

AbbVie is trading at a forward P/E of around 10 & their current dividend yield is 5.38%. If Democrats lose the House of Representatives I wouldn’t be surprised to see ABBV share prices go from $79.56 to $110+ given their strong pipeline.

I sold off a small ABBV position at open & might buy again after the election if either there is a significant price dislocation or the House of Representatives somehow remains under Republican control.

Reuters also mentioned the pulling forward of demand by fears of gun regulations as a potential catalyst for stocks like American Outdoor Brands (AOBC) & Strum Ruger & Co (RGR).

Democratic gains in Congress could pave the way for calls for more stringent legislation to control gun sales. But the prospect of stricter regulations on the firearms industry, paradoxically, could drive up shares of gun-makers.Investors in the past have bid up shares of gun companies in anticipation of tougher rules, because investors predict gun owners will hurry to buy more firearms if they worry about impending restrictions

 

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