3 Stocks to Sidestep in 2024 if Democrats Keep the White House
In a previous column, I noted that each political party has sectors of the economy that they tend to support more than the opposing party. Furthermore, when Republicans and Democrats are in office, they usually reward their supporters and often take steps to harm the opposing party’s backers. I also pointed out that the party that controls the White House can wreak havoc on the industries that it doesn’t like by enacting adverse regulations, deploying regulators to harm companies, and convincing Congress to pass legislation. Moreover, I believe that the tendency to crack down on industries tends to be more pronounced when presidents are in their second terms and don’t need to worry about completely alienating a sector and its employees. Of course, if President Joe Biden wins the 2024 Presidential election, he will start his second term in 2025. With that said, here are three stocks to avoid if Biden is indeed reelected. Also noteworthy is that these stocks to avoid could make good short-selling targets if he does win the 2024 election.
Stocks to Avoid: Coinbase (COIN)
The Biden administration, in general, and the Securities and Exchange Commission (SEC) have made no secret of their tremendous antipathy towards Coinbase (NASDAQ:COIN).
Indeed, in June, the SEC sued COIN for allegedly “operating as an unregistered broker, exchange and clearing agency for…securities.” The agency also contended that the company’s “staking and wallet services violate securities laws.”
If Coinbase loses the lawsuit, it would, at a minimum, have to treat all of the coins on its platform except Bitcoin (BTC-USD) as securities (The SEC has stated that Bitcoin is a commodity). As a result, the company would have to provide Washington with detailed information about all the owners of the other cryptos who trade on the exchange and data on their trades.
I believe that such a scenario would cripple Coinbase’s business. That’s because I think many of those who trade crypto on the exchange are tax evaders and criminals who use crypto to hide from law enforcement. Although these individuals could still use Bitcoin to accomplish that goal, Coinbase’s profits on Bitcoin are relatively low compared to what it generates on other cryptos.
A reelection of Biden would ensure that the SEC would have sufficient time to complete its litigation against Coinbase. Moreover, the agency could also take multiple additional measures against the company in a second Biden administration.
Arch Resources (ARCH)
Democrats are intent on reducing carbon emissions, and coal is very carbon-intensive. Therefore, Democrats tend to be very hostile to coal.
Indeed, in May, Biden’s Environmental Protection Agency “proposed new carbon pollution standards for coal and natural gas-fired power plants.” According to the agency, its rule “would require ambitious reductions in carbon pollution based on proven and cost-effective control technologies.” That rule will be rather costly for power plants that use coal. As a result, they may be disincentivized from buying coal from miners such as Arch Resources (NYSE:ARCH). If Biden gets reelected, this rule will definitely be enacted.
Also, in May, the agency decided that existing rules on coal ash disposal would be extended to many additional sites. That move will likely increase Arch’s costs.
If Biden gets reelected, the agency will likely issue many more regulations that will hurt Arch’s top and bottom lines.
American Public Education (APEI)
The Obama and Biden administrations have enacted regulations limiting the amount of tuition that for-profit colleges can charge. I believe they have done so primarily because Democrats tend to receive significant campaign contributions from traditional, nonprofit colleges. And for-profit colleges compete with nonprofit colleges for limited funds from Washington.
Of course, such rules, along with the hostility that the administration holds towards for-profit colleges, are negative for American Public Education (NASDAQ:APEI). which owns and operates multiple for-profit universities.
Last September, the Biden administration proposed a new version of the “gainful employment rule” that would prevent for-profit colleges from obtaining federal funds if their alumni did not earn adequate amounts of money.
In a second Biden administration, the government would crack down tremendously on for-profit colleges, including American Public Education.
Despite this considerable risk, APEI stock has an elevated forward price-earnings ratio of 24 times.
On the date of publication, Larry Ramer held a short position in COIN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
