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These stocks could be winners under Bill Shorten!

Paul Rickard
Thursday, March 07, 2019

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If the polls and the bookmakers are right, Bill Shorten will become Australia’s 31st Prime Minister and could be sworn in by the Governor General as early as Monday 20 May. Sportsbet is, for a $1 bet, paying $1.20 for an ALP win. It is paying $4.20 for a win by the Coalition.

After six years of Coalition government, an incoming ALP government is sure to throw out some existing policies, refresh the Government’s investment priorities and implement several new spending initiatives. Typically, higher taxing and higher spending than their Coalition counterparts, government monies will flow to the private sector and many companies will see their revenues go up.

While a lot has been written about who may “lose” under the election of an ALP Government, there hasn’t been as much discussion about potential “winners”, particularly companies listed on the ASX. Let’s look at this by considering the industries that may benefit from any government largesse.

1.     Healthcare

The opinion polls say that the ALP rates higher than the Coalition when it comes to the question of “who is most trusted to deliver improved health care services”, so it is not unreasonable to expect that an ALP government will spend more in this portfolio. While State Governments are key players, the bulk of services are delivered by the private sector.

Possible winners include Healius (ASX: HLS), formerly known as Primary Health Care, and Sonic Healthcare (SHL). Healius is involved in delivering GP services, pathology and imaging. While Sonic is more internationally focussed, 39% of revenue still comes from Australian pathology, imaging and clinical services. Both could benefit, if the ALP “unfreezes” the Medicare rebate or implements other initiatives to trigger patient demand.

Although short term “losers”, health insurance companies Medibank Private (ASX: MPL) and NIB Holdings (ASX: NHF) may prove to be long-term winners, if the ALP implements its pledge to cap the rise in health insurance premiums to no more than 2% pa. While no company welcomes price controls, it will give them increased negotiating power with the private hospital operators Ramsay (ASX:RHC) and Healthscope (ASX: HSO), as well as helping to address their long-term Achilles heel relating to the affordability of private health insurance.

2.     Energy

The ALP proposes to achieve 50% renewable energy by 2030 as a way to combat climate change. This means more support for the renewable energy industry and potentially government investment and/or incentives.

A clear winner could be Infigen Energy (ASX: IFN), Australia’s largest listed wind power generator by installed capacity. It has several wind and solar projects currently under development.

Less clear is the position of traditional big energy companies AGL (ASX: AGL) and Origin Energy (ASX:ORG). While both are investing in “clean energy” and related energy services, they have legacy wholesale coal/gas generating businesses and their behaviour as producers and retailers has come under fire from all sides of politics and the ACCC.

3.     Housing

The ALP says that it is going to can negative gearing, except where it relates to investment in new housing. Existing negative gearing arrangements will be “grandfathered”.

Although no date has been announced for the “commencement date” (the date it is canned from), most commentators agree that it will be a net negative for the property market. This may lead to an adjustment in rents (higher), and over the medium term, more investment in new housing. If this happens, major developers and builders, such as Stockland (ASX: SGP) and Mirvac (ASX: MGR) could benefit. Residential development accounts for approximately 35% and 15% respectively of their earnings.

The ALP also has policies promoting the development of affordable housing. Innovative companies that are able to respond to stimulus here could be big winners.

4.     Education

Like health, education is another key focus area for the ALP, which almost invariably means higher spending. Because services are essentially delivered by Government (government run schools and universities), the private sector is less involved.

Two listed companies involved in the tertiary sector (international students, online learning,  training etc) are Navitas (ASX:NVT) and IDP Education (ASX:IEL), although the latter is very focussed on Asia.

Short-term winners

And while the election period is usually bad for consumer facing firms, as consumers tend to defer major purchases, there are some short term winners. The TV companies, Nine Entertainment (ASX: NEC), Seven West Media (ASX: SWM) and Prime Media (PRT) will get a sugar hit from the political advertising. They will be offering a “special” thank you to Clive Palmer.

Published: Thursday, March 07, 2019


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