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Worst Stocks to Buy for the Biden Presidency

Biden's take on the minimum wage, likely moves on the environment and thinking on these important tech issues could put pressure on these stocks.

With the inauguration of President Biden and a Democratic-led Congress, we are once again likely to see the happenings in Washington change the landscape and impact a variety of sectors and companies. Some companies will prosper, some will bob and weave and others will face fresh challenges as they contend with the new environment. 

After we looked at likely winners in a Biden presidency yesterday, let’s tackle those sectors that are likely to encounter some Biden-related headwinds:

President Biden is pushing to boost the federal minimum wage to $15-an-hour, more than twice the current $7.25 and 25% higher than the average minimum wage in the U.S. near $12, according to data collected by Paycor. Coming into 2021, more than twenty states were expected to boost their minimum wages, but Biden’s call for a $15 minimum per hour could accelerate additional hikes in state minimum wages. That would be added margin pressure for those sectors, such as restaurants and retail, that rely on hourly workers. 

As we navigate through the December quarter earnings season, investors will want to listen closely to wage-related comments from the likes of Walgreens Boots Alliance  (WBA) - Get Walgreens Boots Alliance Inc. Report, McDonald’s  (MCD) - Get McDonald's Corporation Report and Starbucks  (SBUX) - Get Starbucks Corporation Report. Meanwhile, that boost to the federal minimum wage could pinch margins at government contracting firms such as CACI International  (CACI) - Get CACI International Inc. Class A Report, Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report, Boeing  (BA) - Get The Boeing Company Report and Raytheon Technologies  (RTN) - Get Raytheon Company Report.

The Biden administration will likely undo some of the regulation cutting done under the Trump administration, which rolled back climate policies and regulations governing clean air, water, wildlife and toxic chemicals. Companies that benefited from those rollbacks, such as oil and gas drillers Helmerich & Payne  (HP) - Get Helmerich & Payne Inc. Report, Cabot Oil & Gas  (COG) - Get Cabot Oil & Gas Corporation Report and Nabors Industries  (NBR) - Get Nabors Industries Ltd. Report, will likely see their regulatory compliance costs move higher, impacting profits and cash flows in the process.

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In addition to environmental regulation, the Biden administration will look to address the growing digital divide in the U.S. between those who have a strong and affordable internet connection, and those that do not. Though that digital divide has existed for some time, the current pandemic made the ability to work and learn from home a true necessity. Potential solutions include extending the availability of broadband in hard-to-reach rural areas, boosting internet speeds, assisting families struggling with internet bills and providing more funding to schools for computers and other equipment. 

The president previously endorsed a House-passed relief bill that included $4 billion in emergency funds to help low-income Americans stay online during the pandemic. While the extended broadband buildout would help companies such as Dycom Industries  (DY) - Get Dycom Industries Inc. Report, Cisco Systems  (CSCO) - Get Cisco Systems Inc. Report and other equipment vendors, new, more affordable data plans at mobile and cable operators such as Charter Communications  (CHTR) - Get Charter Communications Inc. Report and Comcast  (CMCSA) - Get Comcast Corporation Class A Common Stock Report, could weigh on average revenue per user (ARPU) metrics. Those companies are already facing ARPU pressure from customers downgrading services packages to solely internet ones. 

President Biden also campaigned on making gig workers employees and this could emerge as a heated labor issue for his administration. We’ll have to see how the landscapes in both the House and Senate react to such an initiative, but should it come to pass it would be a major headwind for Uber  (UBER) - Get Uber Technologies Inc. Report, Lyft  (LYFT) - Get Lyft Inc. Report and DoorDash  (DASH) - Get DoorDash Inc. Class A Report, among others. 

Following the recent riots in the U.S. Capitol, Democrats have pledged to put the businesses of Facebook  (FB) - Get Meta Platforms Inc. Report, Alphabet's GOOGL  (GOOGL) - Get Alphabet Inc. Report and Twitter  (TWTR) - Get Twitter Inc. Report under the microscope. This is likely to bring Section 230 of the Communications Decency Act, which spares a wide array of digital services from being held liable for the content posted by their users, back into focus. President Biden has shared his view that the law essentially allowed large technology companies to skirt accountability for their actions, and at one point during the campaign he called on Congress to repeal the law in full.

Boeing, Starbucks, Facebook and Alphabet are holdings in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells these stocks? Learn more now.