How will these polar opposite stocks perform after the US election?
As Americans cast their votes today, how will it impact these companies? Our chartist finds out.
3rd November 2020 09:57
by Alistair Strang from Trends and Targets
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As Americans cast their votes today, how will it impact these companies? Our chartist finds out.
Smith & Wesson (NASDAQ:SWBI) and Brookfield Asset (NYSE:BAM)
It's time for the US election. With stores in New York boarding their windows up, our thoughts obviously turned to companies liable to be influenced by the vote.
Gun maker Smith & Wesson (NASDAQ:SWBI) were an obvious first choice to benefit from a result no-one likes, but surprisingly we were unable to find a listed company who sell tear gas, armoured clothing, and the usual paraphernalia associated with election results and civil unrest...
We're intending to focus on the US this week as there appears to be ample reason to anticipate some volatility.
It's a little frightening the number of media outlets speculating on the possibility of a civil war with the ‘wrong’ election result.
To be honest, we're not entirely sure which candidate would be the ‘wrong’ winner!
The other share we chose for analysis, Brookfield Asset Management (NYSE:BAM), was a more straightforward choice.
If the US Democrats win, green and renewable energy is liable to produce some recovery. But if Trump wins, Brookfield enjoy a substantial international footprint, one which should insulate their share price from a Republican win.
It was a surprise to learn the much vaunted right to bear arms in the US, often thought to be a statute to ensure towns could protect themselves from rampaging English redcoats, was favoured for quite a different reason.
The population of the frontier nation approved of guns, due to their use against Native Americans or escaping slaves. Essentially the US liked guns mainly to use against their own people.
Smith & Wesson are regarded as the largest supplier of American-made weaponry, with figures surfacing of record sales in recent times.
For instance, their most recent earnings per share reported at $0.97 (£0.75), substantially ahead of analysts’ estimates of just $0.56.
Since this bumper report in September their share price fell to around $17 presently.
Any movement next below $15 will tend suggest a coming reversal to $12, with secondary, if broken, at $8.6 and hopefully a real bounce.
The share price requires exceed $19 to convince us some miracle recovery is happening, perhaps thanks to a presidential outcome driving even greater demand for weaponry.
Only above the $19 mark dare we mention an initial recovery target of $24.5, with secondary, if exceeded, up at $27.5 and some probable hesitation due to the prior high level.
Closure above $27.5 shall be thought of as a really big deal, signalling the potential of a future $36 dollar ambition.
Perhaps worth watching as things could change this week.
Source: Trends and Targets Past performance is not a guide to future performance
Brookfield Asset Management (NYSE:BAM). A company with its feet in every camp of energy supply, ranging from hydroelectric through solar and wind, are likely to experience a boost should the Biden camp triumph in the election.
To convince us a price movement is genuine we'll be happy if the share manages to rise above the $40 level as this looks very capable of driving recovery to an initial $48.
If bettered, our secondary of $61 makes a lot of visual sense.
To suggest trauma, weakness below the $29 level looks fairly non-threatening, calculating with the potential of a visit to an initial $26 with secondary, if broken, down at $22 and hopefully a proper rebound.
Source: Trends and Targets Past performance is not a guide to future performance
Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.
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