It’s no secret that many people are on edge as Election Day 2024 approaches. Whether one leans left or right, the constant stream of news and social media chatter can amplify concerns, making it easy to feel anxious about the future. But when it comes to investing, history teaches us that using politics as a criterion rarely pays off. Sure, some might argue that past performance isn’t a guarantee of future success, but those who think of moving to the sidelines due to political shifts often lack solid historical justification for that decision.
Take the stock market’s performance during election years as an example. On average, the market gains 8.2% in the year leading up to an election and 6.8% in the year following. These figures don’t even account for the power of reinvested dividends, which could boost returns further. Simply put, those who sell off their stocks in reaction to political events often miss out on significant gains and face the added pain of tax consequences and transaction fees.
It’s tempting to let political rhetoric push an investor into making sudden moves in their portfolio, but reacting to campaign promises or political sound bites is rarely wise. Politicians tend to make bold, emotional claims—unlike the measured guidance found in company filings or analyst reports. Their statements often change, leaving investors chasing uncertainty.
Volatility is the Friend of the Long-Term-Oriented Investor
That said, the volatility around election time can actually provide opportunities. When others panic, we can seize the moment to take profits on stocks that have appreciated, reinvesting in fresh ideas that haven’t yet had their time to shine.
One of those fresh ideas, Elevance Health (ELV), recently saw its stock drop over 14% after Q3 results showed issues with its Medicaid plans, including a mismatch between pricing and costs. CEO Gail Boudreaux has been upfront about the near-term challenges, but the long-term potential remains strong.
Despite short-term hurdles, Elevance’s penetration in local markets and via its pharmacy benefit platform make it an attractive play, especially as the current price-to-earnings (P/E) ratio is just 11 times next-twelve-month EPS.
Elevance, I would argue, is a Value-priced Growth stock as the respective consensus EPS forecasts for 2025 and 2026 are $35.51 and $40.32, nicely higher than the $33.00 projected this year.
And, I will add that the stock has traded for an average P/E in the 16 to 17 range over the last three, five and 10 years, with a reversion to a more normal valuation metric and profit growth offering two ways to win with ELV.
By staying patient and focused on long-term goals, we can weather the political storms and come out ahead.
For more of my thoughts on the Election, check out our latest Special Reports available to subscribers of The Prudent Speculator.
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