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Republicans May Retain a Slim Majority in Congress: 5 Picks

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Republicans and Democrats are probably heading for a photo finish in the mid-term Congressional poll. The gap between the Democrats and Republicans, which was heavily inclined toward the former, is getting narrower as the voting day approaches. On Nov 6, all 435 seats in the House of Representatives, 35 of the Senate’s 100 seats and 36 state governor’s posts will go for poll.

Several pre-poll surveys have shown that Democrats will get majority in the House of Representatives while Republicans will retain the control of Senate. However, a few surveys also forecasted that Republicans may even retain the control of House of Representatives by a slim margin. Consequently, it will be prudent to invest in stocks from Oil and natural gas, coal and defense industries with a favorable Zacks Rank.

Close Fight Ahead 

According to several poll surveys, till the end of 2017, Democrats were leading by a healthy margin of by around 13 points for U.S. Congress. However, that lead has steadily come down to around 6 points in the first week of November. Polls results released on Nov 2, by ABC News/The Washington Post and NBC News/Wall Street Journal have confirmed this trend.

Moreover, the NBC News/Wall Street Journal poll has shown that 29% Americans thought the country was heading in the right direction at the end of 2017. In fact, the figure has now gone up to 38%, better than 37% when Trump became President. Similarly, the ABC/Washington Post has shown that 65% Americans have positive view on the U.S. economy, a significant improvement from 51% when Trump took charge of office.

Per the NBC/Wall Street Journal poll, Trump’s approval stood at 46% while 52% people are against him. CNN survey revealed that Trump’s approval is at 44%. According to IBD/TIPP poll released on Nov 4, 77% of Americans think economic well-being will be the top priority for making voting decisions.

In this regards, Trump is likely to be the hero with 47% giving him an "excellent" or "good" rating while just 35% gave “poor” rating. Further, 56% of the surveyed people said the U.S. economy is improving.

Republicans Hold Slight Edge

Republicans are likely to retain control of the Senate while the House of Representatives may go in favor of Democrats. Historically, the stock market has done reasonably well even when the Congress is divided with Republicans in Senate and Democrats in the House of Representatives. Wall Street has always been able to dodge policy deadlock situations in the U.S. government.

The economy, immigration and impeachment have become three major issues for the mid-term Congressional elections. While economy favors the Republicans, the impeachment issue is the key one for Democrats.

Immigration is a divisive issue as the democrats have criticized Trump administration's "zero-tolerance" policy toward separating migrant children from their parents. However, various polls have shown that women voters, who are likely to be very sensitive to this issue, are gradually inclining toward Republicans as the Election Day approaches.

Our Top Picks

With Republicans like to retain majority of Congress, investing in stocks from defense, coal and oil and natural gas industries, which have prospered in the Trump era, will be lucrative at this stage. We narrowed down our search to five such stocks with Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our five picks year to date.

Aerojet Rocketdyne Holdings Inc.  (AJRD - Free Report) focuses on developing military, civil and commercial systems and components for the aerospace and defense industry markets. It has expected earnings growth of 146% for current year. The Zacks Consensus Estimate for the current year has improved by 43.3% over the last 30 days.

Ramaco Resources Inc.  (METC - Free Report) is an operator and developer of high-quality, low cost metallurgical coal. It has expected earnings growth of 358.5% for current year. The Zacks Consensus Estimate for the current year has improved by 1% over the last 30 days.

SunCoke Energy Inc.  (SXC - Free Report) is a producer of metallurgical coke in the United States. It has expected earnings growth of 35.7% for current year. The Zacks Consensus Estimate for the current year has improved by 31% over the last 30 days.

Phillips 66 Partners LP (PSXP - Free Report) owns, operates, develops, and acquires crude oil, refined petroleum products, and natural gas liquids pipelines, terminals, and other transportation and midstream assets. It has expected earnings growth of 56.4% for current year. The Zacks Consensus Estimate for the current year has improved by 7.4% over the last 30 days.

Hess Corp.  (HES - Free Report) is a global exploration and production company that develops, produces, purchases, transports and sells crude oil and natural gas. It has expected earnings growth of 97% for current year. The Zacks Consensus Estimate for the current year has improved by 77.4% over the last 30 days.

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