Happy Tuesday afternoon to everyone on The Street. Here's a snapshot of where markets ended the trading session, plus tomorrow's trade idea delivered to you today.

• 🟩 | US stocks rose Tuesday as the Street feverishly anticipates the results of the 2024 US presidential election.  

• 📈 | One Notable Gainer: Palantir Technologies’ stock soared 23.5% to a record high on a monster earnings beat, boosted by AI demand.

• 📉 | One Notable Decliner: Shares of Archer-Daniels-Midland slumped 6% after missing estimates and canceling a scheduled call to discuss its ongoing accounting headaches.

• 🔮 | Tomorrow's Trades: Commander-in-Chief Motors vs. NVR Trump. Scroll down for more.

Plus a quick note: You’ll notice above that we said “Tomorrow’s Trades”, plural. That’s because we have a special election edition for you ahead of tonight’s main event. Below, we’ve outlined two ideas for you. One stock that could benefit from a Donald Trump victory and one stock that could benefit from a Kamala Harris victory.

The format will be slightly different from the one you’re used to, but we hope you enjoy the research, analysis, and slight change of pace.

There is a poll at the bottom. After you read today’s edition, please vote to let us know if you’d like more of these in the future. Happy election day, everyone. Let’s dive in.

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ONE TRUMP TRADE IDEA

Commander-in-Chief Motors

A 2024 election win by former president Donald Trump could potentially pave the way for a strong run by General Motors (GM). The American auto giant may benefit from a supportive environment for traditional automotive manufacturing.

General Motors is making strides in the electric vehicle market, but its strength is in its century-old, high-margin gas-powered vehicle production. And its commitment to American manufacturing could be further enhanced by another Trump administration.

Company Overview

Founded in 1908, General Motors is a pillar of the American automotive industry, one of the so-called “Big Three” US automakers based in Detroit, Michigan.

Financially, GM's revenue is heavily driven by its traditional vehicle sales, through well-known brands like Chevrolet, GMC, Cadillac, and Buick. But it may be well-positioned for future growth, too, through its investments in EVs and autonomous vehicles.

A Trump Victory Could Be a Catalyst

One of the cornerstones of Trump's economic policy agenda as a presidential candidate has been promoting American manufacturing, evidenced by his "America First" and "Buy American" campaigns. If re-elected, Trump would likely renew his push to prioritize American companies in government contracts and incentives — a move that could directly benefit General Motors.

During Trump's first term, his administration proposed policies that benefited domestic manufacturers, and there is reason to believe that a second term would see the former president double down on this strategy. A new Trump administration could see the implementation of a "Buy American" car purchasing program, encouraging American consumers to choose domestically made cars over foreign imports, with General Motors’ established suite of classic, American-made brands an obvious beneficiary. 

Meanwhile, Trump's proposed trade policies, which include steep tariffs on foreign competitors, could further aid General Motors by making imported vehicles more expensive to US consumers. Under Trump’s previous presidency, the US imposed aggressive tariffs on Chinese-made goods, including auto parts. A continuation or expansion of these tariffs could further benefit General Motors by making its domestic vehicles more competitive.

Speaking of competition, one of the more significant industry shifts under the Biden administration has been the promotion of electric vehicles through the Inflation Reduction Act. This act introduced federal tax credits of up to $7,500 for new EV purchases and incentives for used EVs. This disproportionately benefited emerging EV manufacturers like Tesla (TSLA) and Rivian (RIVN), allowing them to offer more competitive prices and carve out a substantial share of the EV market.

However, Trump has indicated that he would likely scale back or eliminate these EV tax credits if he’s elected, arguing that they unfairly subsidize clean energy at the expense of traditional industries. Since General Motors is currently balancing its investments between traditional internal combustion engine vehicles and EVs, such a shift may be beneficial in the short term. Without the EV tax credits that help Tesla and other pure-play EV manufacturers, the competitive gap between General Motors’ gas-powered and EV divisions would narrow. 

GM's popular ICE models, including SUVs and trucks that generate a significant portion of its profits, could gain a competitive edge over fully electric competitors in a market without federal EV subsidies.

Fundamentals, Analyst Ratings, and Price Targets

General Motors has consistently handed in solid quarterly results. 

In its latest quarterly report for Q2 2024, GM posted $48 billion in revenue, marking a 7% increase year-over-year. The company's net income for the quarter stood at $2.9 billion, a 14% improvement from the same period last year. In terms of EV performance, GM's efforts to ramp up production through its Ultium battery platform have begun to pay off, contributing to a rise in EV deliveries. GM delivered more than 21,930 electric vehicles in Q2 — a 40% increase annually.

Overall, the Street appears optimistic about General Motors' prospects. Of the 28 analysts covering the company, the stock holds a consensus Buy rating. The 12-month average price target of the stocks is $55.53, implying just 3.4% upside from the stock’s close today.

ONE HARRIS TRADE IDEA

NVR Trump

An electoral victory by Vice President Kamala Harris could provide a boost for homebuilding company NVR (NVR).

The presidential candidate’s plan to build 3 million new homes and extend tax breaks to builders focused on first-time buyers plays directly into NVR’s wheelhouse of affordable, entry-level homes. With additional funding to remove zoning restrictions, the firm stands to benefit significantly. Additionally, with the favorable mortgage rate environment, NVR is well-positioned for growth assuming demand for new homes rises while existing homeowners continue to stay put.

Company Overview

Founded in 1980, North Virginia Homes, or NVR, is the fourth-largest homebuilder in the US by revenue. The firm operates primarily through its Homebuilding division, which accounts for 98% of revenues, with the rest coming from its Mortgage Banking arm.

NVR’s asset-light strategy sets it apart from the competition. Instead of buying and holding land, NVR favors lot purchase agreements, putting down small, non-refundable deposits to secure the land without tying up large amounts of capital. This capital-efficient approach has helped NVR grow faster than many of its larger rivals, delivering an impressive 23% annualized earnings growth over the last five years.

A Harris Victory Could Be a Catalyst

Harris has committed to building 3 million new homes during her first term, targeting both rental housing and homes for sale. The US currently faces a housing shortage of 4.5 million homes, and such a policy could significantly narrow that gap. Harris aims to achieve this by offering tax incentives to homebuilders focused on entry-level homes for first-time buyers, a strategy that could particularly benefit companies like NVR, known for its affordable East Coast homes through Ryan Homes.

Additionally, Harris’s proposal includes $25,000 in down payment support for first-time buyers who have demonstrated timely rent payments for at least two years, and a $40 billion innovation fund to help local governments address zoning restrictions and other housing challenges. For NVR, with its strong presence in the entry-level market, these policies could be game-changing.

The average 30-year fixed mortgage rate has ranged from 6% to 7% this summer. Post-pandemic, rates remained below 3.5% from March 2020 to 2022. For those who locked in these ultra-low mortgages, selling their homes and buying a new home at today's higher rates is less attractive, incentivizing many homeowners to stay put and exacerbating the inventory shortage.

But despite the scant listings and high prices, Americans still need new homes. And with less competition from existing homeowners, demand for homebuilders is growing. This trend could continue if the Federal Reserve cuts interest rates further, as mortgage rates become relatively lower, making the market more affordable for some, yet remain well above the lowest rates seen in recent years, keeping many sellers on the sidelines.

In other words, as long as the housing market trends toward affordability — due to federal policy, Fed policy, or both — but remains above its pandemic-era lows, the environment will remain a sweet spot for large homebuilders like NVR.

Fundamentals, Analyst Ratings, and Price Targets

For NVR, revenue has risen annually in the last two quarters, together with sustained high EBIT margins of around 20%. With rates declining, there could be an increase in buyer activity, and consequently an increase in house prices, which could lead to even higher margins and revenue.

NVR isn’t exactly a Wall Street darling right now. It's covered by just six analysts, with four rating it a Hold, and only two a Buy. The average target price is $9,406, near where the stock closed today. The highest target sits at $10,800, while the lowest is $8,450. 

But NVR could be an under-the-radar gem, flying below Wall Street’s radar, with even more upside potential waiting to be unlocked — particularly in the case of a Harris presidential victory.

Below, see NVR’s projected potential share price in future years utilizing Koyfin consensus estimates and a 2.63x P/S multiple, equal to the FY23 multiple. 

ON OUR RADAR

CNN: Striking machinists voted yesterday to accept Boeing’s latest offer, ending the costliest US strike in over 25 years.

Reuters: Walmart only shipped 340,000 kilos of Christmas goods to the US in the year ended Sept. 30, as retailers prepare for a lackluster holiday season.

ABC: The Home Depot’s co-founder Bernard "Bernie" Marcus has died at 95.

WSJ: Kroger finalized a $1.4B opioid crisis settlement, with Nevada set to receive up to $26.7M, starting next year.

CNBC: Piper Sandler says these stocks are at risk if Trump allows Elon Musk to follow through on his plan to cut $2T from the federal budget.

SPONSORED BY MODE MOBILE

32,481% Growth: Invest in the Smartphone Revolution @ $0.25/Share

Mode Mobile turns your phone into a revenue stream, with users saving and earning $35M+.. Their 32,481% growth ranks #1 on Deloitte's 500 fastest growing list.. 28,197 investors already backed the $1T+ smartphone industry's new disruptor. Now you can at just $0.25/share. Partnerships with Best Buy, Walmart, & Amazon show potential for even more growth! Invest now and get up to 100% bonus shares!

💸 Reserve Your Shares: $0.25/Share - Act Quickly!

This is a paid advertisement for Mode Mobile Regulation A offering. Please read the offering circular and related risks at invest.modemobile.com.

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