For Immediate Release
Chicago, IL – November 14, 2023 – Today, Zacks Investment Ideas feature highlights Enphase Energy ENPH, Consol Energy CEIX, Warrior Met Coal HCC, Geo Group GEO and General Dynamics GD.
3 Industries Benefiting from Government Policies
One perspective investors can take is that the US government can be viewed as the largest business in the world due to its vast scale of operations, diverse functions, and extensive financial transactions. The federal government manages an extensive budget, engaging in activities ranging from defense and healthcare to infrastructure and social programs. It collects revenue through taxation and operates numerous agencies and departments that closely resemble the divisions of a large corporation.
Additionally, the government engages in international trade, diplomacy, and economic regulation, reflecting business-like functions on a global scale. Critics of this analogy may argue that the government's primary purpose is public service rather than profit. Still, the sheer magnitude and complexity of its operations evoke parallels to a colossal enterprise. Below are 3 industries currently benefiting from government policy:
Clean Energy Agenda
Starting with the Obama administration and continuing with the Biden administration, the US government has been laser-focused on a "clean energy agenda" intent on dismantling the threats of climate change through government policy. Such government policy incentivizes industries such as solar while disincentivizing industries like coal. Meanwhile, many large companies are operating and making investments based on ESG standards (Environmental, Social, and Governance). Implementing these policies has led to the bankruptcies of more than 60 coal companies over the past decade.
However, the coal stocks that have survived are once again thriving again because companies' clean energy companies like Enphase Energy are seeing slower sales growth due to rising rates and less consumer appetite.
Global Demand Soars Despite Green Movement
For the remaining coal companies, the picture has morphed from bleak to beautiful. Not only is there less competition, but global coal demand reached an all-time high in 2022 despite a weaker global economy and a weak Chinese economy (the world's largest coal user). Analysts expect the bullish trend to continue. Coal producers like Consol Energy and Warrior Met Coal are experiencing huge demand. For HCC, Wall Street analysts have recently revised EPS estimates higher and anticipate robust double-digit growth in Q1 and Q2.
Secure Facilities/Detention Centers/Immigration Processing
Immigration policy, particularly on the Southern US Border, is a hotly contested issue. On the one hand, a lax border policy allows citizens from Latin American countries such as Honduras and Venezuela to escape violence and economic despair. On the other hand, an open border policy can open the door to security risks and mean more government spending. Regardless of which side you land on, one thing is certain: border crossings have been increasing rapidly. According to the US Customs and Border Protection agency, in 2020, there were 458,000 encounters at the southern border. With over a month left in 2023, there have already been close to 2.5 million.
Companies such as Geo Group benefit most from this mega-trend because they run detention and immigration processing centers. GEO shares recently triggered a bullish 'Golden Cross" pattern.
Aerospace & Defense
Unfortunately, global conflicts are on the rise. Since the war in Ukraine began, the Biden administration and the US Congress have supplied more than $75 billion in assistance to Ukraine. With war flaring up in the Gaza Strip, the US is intent on doing the same to help Israel and is likely to send upwards of $10 billion. Last month, defense giant General Dynamics spiked after reporting earnings that beat analyst expectations. In the coming quarters, Zacks Consensus Estimates suggest GD's earnings will take off further.
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