The Biggest Election Winner Is an Investing Theme That Could Last for Years
The Republican victory will bring winners and losers, but the key to market success is to find a theme that is likely to endure and ride it as long as possible.
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After a bout of enhanced volatility, the decisive Republican election victory will produce a number of new market themes in the months ahead. There will be winners and losers, but the key to market success is to find a theme that is likely to endure and ride it as long as possible.
One of the big changes will be a shift in the regulatory environment. Agencies such as the FTC, FDA, EPA, and SEC will likely be less restrictive, which will increase the number of mergers and acquisitions and help speed up approvals in pharmaceuticals, biotechnology, and other industries.
One industry that is likely to see a large inflow of capital is Bitcoin and Bitcoin-related names. I have not been a big fan of Bitcoin, primarily because there isn't an easy way to value it. There are no financial statements or cash flow. All there is is supply and demand and charts.
The great likelihood is that the Republican victory will create increased demand for Bitcoin, which will build over time as major investors view it as an asset class that they must own. The more accepted Bitcoin becomes, the more likely that funds will allocate funds to it, just like they do with precious metals.
Under the current leadership, the SEC has been largely hostile to Bitcoin and cryptocurrency. There have been a number of roadblocks to ETFs and other ideas that will increase liquidity. However, Donald Trump has been highly supportive of Bitcoin during his campaign, and it is very likely that Elon Musk will be an important part of his administration. Musk has Bitcoin on Tesla's TSLA balance sheet and has been an active investor in cryptocurrencies.
There are two ways to play the Bitcoin theme. The first is with actual bitcoins or ETFs that own it directly, such as iShares Bitcoin Trust ETF IBIT. MicroStrategy MSTR has an operational business but is very heavily invested in Bitcoin and is a defacto Bitcoin ETF.
The second way to have exposure to Bitcoin is to own the companies that mine it. Incredible computer power is needed to create new Bitcoin. Most Bitcoin miners carry Bitcoin on their balance sheets and benefit from it as prices rise.
What I like most about the Bitcoin miners is that they are diversifying into offering their High Powered Computing (HPC) computing capabilities to companies that need them for the development of AI. The demand for new data centers is still growing at an incredible pace, and some Bitcoin miners have already entered into deals to lease some of their computing power. This diversification should help to smooth out some of the volatility of a straight investment in Bitcoin.
Currently, I own Bitcoin in the form of iShares Bitcoin Trust ETF and in the form of miners such as Core Scientific CORZ, TeraWulf WULF, and Cipher Mining CIFR. I plan to add to the positions in all four stocks as better entry points arise and the charts develop.
With the tailwinds that the election brings, I believe that this is an investing theme that could last for months and years.
At the time of publication, Rev Shark was long IBIT, CORZ, WULF and CIFR.
