The US election is just a few weeks away. There could potentially be many changes over the coming months and years, depending on who wins. At this stage, it’s too early to tell who will succeed. Certain sectors and companies could benefit if President Trump wins. Other areas could benefit if Joe Biden wins.
So, how can investors decide which shares to buy without knowing the direction of US government policy? Instead of trying to guess the election winner, I prefer to look at companies that stand to benefit if either party wins.
Both parties have expressed a desire to increase infrastructure spending, to renew and improve America’s waning infrastructure. For example, roads, pavements, and train lines. So, I’m looking at UK companies that stand to benefit from an increased focus on US infrastructure.
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Which shares to buy before the election?
One UK company that I’d look at buying before the election is Ashtead Group (LSE: AHT). Ashtead is a FTSE 100-listed, international equipment rental company. It rents out a range of construction and industrial equipment. Smaller construction companies and contractors tend to find it much easier to rent these tools rather than buy, store, and maintain them.
Ashtead is well-positioned to take advantage of a renewed focus on US infrastructure through its Sunbelt Rentals brand. Comprising 86% of group revenue, Sunbelt Rentals is the second-largest equipment rental company in North America.
Ashtead investors have been rewarded greatly in recent years. Ashtead shares are the best performing in the FTSE 100 over the past decade, gaining over 2,200%. Although I don’t think they will be able to replicate those gains over the next decade, the company is well placed to grow further.
When researching which shares to buy, I like to look for companies that demonstrate high quality. Ashtead fits that criteria with a double-digit profit margin and a return on capital of over 12%. It even pays investors a dividend.
A solid construction
A second share I’m looking at before the US election is Somero Enterprises (LSE: SOM). This is a much smaller company than Ashtead but with a greater capacity to grow, in my opinion. Somero is a manufacturer of laser-guided equipment used to spread large volumes of concrete. For example, for commercial flooring and other horizontal surfaces.
Although it has sales in over 90 countries, Somero’s largest market is in North America. Construction fundamentals remain positive in the US, particularly if there is a new focus to push through current project backlogs.
Long-term investors have much to like about Somero. Not only does it ooze quality, but I’d say that it’s also relatively cheap. With little direct competition and high barriers to entry, Somero manages a near 30% profit margin and over 40% return on capital.
Somero’s balance sheet looks strong too, with plenty of net cash. It even gives a relatively generous dividend of almost 6%.
Risks remain around Covid-19 measures over the coming months, but I’m confident that Ashtead and Somero are two decent shares to buy for my Stocks and Shares ISA.
