In this article, we discuss the 10 stocks to buy as the Senate passes the Inflation Reduction Act.
The United States Senate approved the 755-page Inflation Reduction Act on August 7, a sweeping legislation that authorized nearly $369 billion in energy spending, $60 billion of which will be used to shore up solar and wind manufacturing in the US, and includes extensions to electric vehicle tax credits as well as incentives for new battery manufacturing and health insurers. The bill is part of a larger plan by US President Biden to reduce carbon emissions in the US to below 2005 levels by 2030.
Although the successful passage of the bill in the Senate has helped produce some respite for climate, health, and EV stocks from the present market turmoil, corporate giants like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) have come under pressure as the bill includes a new tax on share buybacks and increases the corporate tax to around 15% as part of a move to tackle soaring inflation. Republican lawmakers dismissed the bill as irresponsible as the US braces for a recession.
Democrats contend that the bill would raise $740 billion in revenue for the US government over the next ten years. The government plans to spend nearly around $430 billion of this figure through the provisions of the Act. The bill includes new funding for the Internal Revenue Service to help enforce new tax laws that will raise $313 billion in revenue for the government. According to the Committee for a Responsible Federal Budget, it is estimated that the package would reduce debt for the US by nearly $2 trillion over two decades.
Our Methodology
The companies that have the potential to gain from the successful passage of the Inflation Reduction Act in the US Senate were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Stocks to Buy as Senate Passes Inflation Reduction Act
10. ChargePoint Holdings, Inc. (NYSE:CHPT)
Number of Hedge Fund Holders: 16
ChargePoint Holdings, Inc. (NYSE:CHPT) provides electric vehicle charging networks. The Inflation Reduction Act has proposed $7,500 in electric vehicle tax credits, a move that will act as a major growth catalyst for EV manufacturers. In addition to EV carmakers, other EV stocks are also likely to be given a major boost as more EVs will need more charging stations. The EU is also debating ending internal combustion engines in the region by 2035, further encouraging EV sales. The US is moving ahead with plans for a national EV charging network as well.
On July 14, JPMorgan analyst Bill Peterson maintained an Overweight rating on ChargePoint Holdings, Inc. (NYSE:CHPT) stock with a price target of $18, noting that the stock offered an attractive risk/reward profile to long-term investors.
At the end of the first quarter of 2022, 16 hedge funds in the database of Insider Monkey held stakes worth $34 million in ChargePoint Holdings, Inc. (NYSE:CHPT), compared to 19 in the preceding quarter worth $94 million.
Just like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), ChargePoint Holdings, Inc. (NYSE:CHPT) is one of the stocks in the spotlight as the new inflation reduction bill is passed by lawmakers.
9. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 18
Brookfield Renewable Partners L.P. (NYSE:BEP) owns and runs renewable power generating facilities. The Inflation Reduction Act has set aside nearly $60 billion for new solar and wind turbine manufacturing. Brookfield, which sources a majority of power from renewable sources, including solar and wind, stands to benefit from this increased spending in the sector. The new proposal also includes incentives for manufacturing inside the US, aiming to make the US market more competitive with China in solar and wind manufacturing.
On August 8, JPMorgan analyst Mark Strouse maintained an Overweight rating on Brookfield Renewable Partners L.P. (NYSE:BEP) stock and raised the price target to $43 from $41, noting that the Inflation Reduction Act would accelerate growth in the energy transition to renewables.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Select Equity Group is a leading shareholder in Brookfield Renewable Partners L.P. (NYSE:BEP), with 2.6 million shares worth more than $107 million.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Brookfield Renewable Partners L.P. (NYSE:BEP) was one of them. Here is what the fund said:
“Brookfield Renewable Partners L.P. (NYSE:BEP) is a pure-play renewables operator and developer headquartered in Canada, focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s globally diversified, multi- technology renewables business makes it an attractive partner. Brookfield’s development pipeline stands at 18,000 MWs, providing confidence the company can meet its targeted double- digit cash flow growth through to 2025. The market narrative around the energy transition and energy security, along with increasing fossil fuels prices which have driven greater focus on switching to renewables, helped Brookfield Renewable Partners L.P. (NYSE:BEP) shares in the quarter.”
8. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 32
Duke Energy Corporation (NYSE:DUK) is a North Carolina-based energy company. Since the Inflation Reduction Act includes provisions for tens of billions for solar and wind firms, Duke Energy will be one of the biggest beneficiaries of this since the firm recently announced that it is developing wind power projects, in partnership with TotalEnergies, that amount to around $315 million, with Duke paying $155 million of this share. The projects are part of a larger plan by US President Biden to push 30 GW of offshore wind power by 2030.
On July 18, Barclays analyst Eric Beaumont maintained an Equal Weight rating on Duke Energy Corporation (NYSE:DUK) stock and lowered the price target to $110 from $119, backing the firm to maintain a yield of over 3% in the coming decade.
At the end of the first quarter of 2022, 32 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Duke Energy Corporation (NYSE:DUK), compared to 36 in the preceding quarter worth $1.1 billion.
7. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 33
Plug Power Inc. (NASDAQ:PLUG) provides hydrogen fuel cell solutions. The Inflation Reduction Act has proposed new battery manufacturing credits that will help companies like Plug Power. The bill also includes tax credits for companies working in the climate sector. Plug Power recently announced that it will be building a new 120 MW industrial-scale green hydrogen plant in Texas in partnership with New Fortress Energy. The plant is one of the largest of its kind in all of North America.
On August 2, Northland analyst Abhishek Sinha initiated coverage of Plug Power Inc. (NASDAQ:PLUG) stock with a Market Perform rating and a price target of $25, noting that the firm had the balance sheet to support growth visions.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Plug Power Inc. (NASDAQ:PLUG), with 5.2 million shares worth more than $150 million.
6. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 44
Albemarle Corporation (NYSE:ALB) operates as a chemicals firm. The chemicals that the company provides are some of the important raw materials used in the manufacturing of EV batteries. The Inflation Reduction Act has proposed tax credits for firms working in the EV sector since the products they sell help reduce carbon emissions, and one of the stated goals of the new bill is to reduce carbon emissions in the US. Albemarle recently beat market expectations on earnings per share for the second quarter and raised guidance for the full year.
On August 8, Deutsche Bank analyst David Begleiter maintained a Buy rating on Albemarle Corporation (NYSE:ALB) stock and raised the price target to $270 from $255, appreciating the second quarter earnings of the firm.
At the end of the first quarter of 2022, 44 hedge funds in the database of Insider Monkey held stakes worth $454 million in Albemarle Corporation (NYSE: ALB), compared to 48 the preceding quarter worth $505 million.
In addition to Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), Albemarle Corporation (NYSE:ALB) is one of the stocks grabbing attention as US lawmakers approve policies aimed at reducing inflation.
In its Q3 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Albemarle Corporation (NYSE:ALB) was one of them. Here is what the fund said:
“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The firm’s shares outperformed in the quarter, driven largely by the current robust demand environment for lithium used in the manufacturing of electric vehicle batteries. As the global push towards the reduction of carbon emissions continues to gain steam, Albemarle Corporation (NYSE:ALB) is well positioned to benefit from the accelerating adoption of electric vehicles.”
5. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Number of Hedge Fund Holders: 47
SolarEdge Technologies, Inc. (NASDAQ:SEDG) markets semiconductor equipment to the solar industry. Even though the company missed market expectations on revenue for the second quarter of 2022 in recently announced earnings results, the stock has gained in the past few weeks due to the successful passage of the Inflation Reduction Act in the US Senate. The new Act has set aside nearly $60 billion to incentivize solar and wind power manufacturing inside the United States.
On August 8, JPMorgan analyst Mark Strouse maintained an Overweight rating on SolarEdge Technologies, Inc. (NASDAQ:SEDG) stock and raised the price target to $419 from $373, noting that investor expectations with the industry would remain materially high in the coming months.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Impax Asset Management is a leading shareholder in SolarEdge Technologies, Inc. (NASDAQ:SEDG), with 588,056 shares worth more than $188 million.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and SolarEdge Technologies, Inc. (NASDAQ:SEDG) was one of them. Here is what the fund said:
“The Strategy is well-exposed to this secular shift and to accelerated spending on alternative energy sourcing and generation. Growth in renewables should benefit SolarEdge Technologies, Inc. (NASDAQ:SEDG), a company we repurchased on weakness in the first quarter that develops electronics for solar installations and should take advantage of greater incentives for solar installations in many geographies. SolarEdge Technologies, Inc. (NASDAQ:SEDG) has expanded its products offering to address larger markets in commercial and utility solar on top of its traditional residential solar market.”
4. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 66
Humana Inc. (NYSE:HUM) operates as a health and well-being firm. The Inflation Reduction Act has maintained tax credits for health firms and extended subsidies for health insurers under the Obamacare law. These subsidies, which were increased during the COVID-19 pandemic, keep the benefit hikes from expiring at the end of this year. People who purchase health insurance through Obamacare will enjoy nearly $64 billion of the total spending on healthcare that is included in the Act. Humana, one of the largest health insurers in the US, will benefit from this.
On July 28, Deutsche Bank analyst George Hill maintained a Buy rating on Humana Inc. (NYSE:HUM) stock and raised the price target to $514 from $450, appreciating the second quarter earnings beat of the firm.
At the end of the first quarter of 2022, 66 hedge funds in the database of Insider Monkey held stakes worth $3.1 billion in Humana Inc. (NYSE:HUM), the same as in the preceding quarter worth $3.8 billion.
In its Q1 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Humana Inc. (NYSE:HUM) was one of them. Here is what the fund said:
“During the quarter, we also sold our position in Humana Inc. (NYSE:HUM) in favor of names that, in our opinion, offer more potential upside. Geographically, we ended the quarter with 53% of the portfolio in the U.S., 38% in the U.K. and Europe, and 9% in Asia.”
3. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 72
CVS Health Corporation (NYSE:CVS) is a Rhode Island-based company that provides healthcare services. Reports indicate that the company is planning to purchase competitor Signify Health that is worth close to $5 billion. The latter uses a platform that employs analytics to help health insurers. Health insurers are one of the biggest beneficiaries of the Inflation Reduction Act, that has extended tax credits and increased spending on health, although the bill also includes plans to negotiate over drug prices.
On August 8, analyst Michael Cherny maintained a Buy rating on CVS Health Corporation (NYSE:CVS) stock with a price target of $122, noting that the Signify deal would help the firm with continued evolution in the health sector.
Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Harris Associates is a leading shareholder in CVS Health Corporation (NYSE:CVS), with 4.1 million shares worth more than $421 million.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and CVS Health Corporation (NYSE:CVS) was one of them. Here is what the fund said:
“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of CVS Health Corporation (NYSE:CVS) which is well-positioned to help define the future of health care in terms of costs, quality and convenience.”
2. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 80
Tesla, Inc. (NASDAQ:TSLA) markets electric vehicles and clean energy solutions. Even though the Inflation Reduction Act has increased the minimum corporate tax and also includes plans to tax share buybacks, companies like Tesla are still likely to benefit from the plan since it includes massive tax credits and plans to spend hundreds of millions on new EV and battery manufacturing in the United States. The bill also incentivizes EV sales, which will help firms like Tesla post better delivery numbers.
On August 8, Canaccord analyst George Gianarikas maintained a Buy rating on Tesla, Inc. (NASDAQ:TSLA) stock and raised the price target to $881 from $815, noting that macro factors and price increase had the potential to affect the order rates of the firm.
At the end of the first quarter of 2022, 80 hedge funds in the database of Insider Monkey held stakes worth $11 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 91 in the previous quarter worth $12 billion.
Here is what Grantham Mayo Van Otterloo & Co. LLC has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla, Inc. (NASDAQ:TSLA). At its Battery Day last year, Tesla, Inc. (NASDAQ:TSLA) projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 102
NVIDIA Corporation (NASDAQ:NVDA) operates as a visual computing firm. Inflation has affected the margins for companies like NVIDIA, which recently slowed hiring and warned that slowing PC and gaming unit sales could weigh on the firm in the near term. The bill also includes provisions for $369 billion in energy security and climate change programs. NVIDIA, one of the leading chipmakers in the US, will benefit from this as the chips it makes are used in many of these climate change technologies.
On August 8, Oppenheimer analyst Rick Schafer maintained an Outperform rating on NVIDIA Corporation (NASDAQ:NVDA) stock and lowered the price target to $250 from $300, noting that there was a weakness in PC and gaming unit sales.
At the end of the first quarter of 2022, 102 hedge funds in the database of Insider Monkey held stakes worth $6.3 billion in NVIDIA Corporation (NASDAQ:NVDA), compared to 110 the preceding quarter worth $10.4 billion.
In its Q1 2022 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“NVIDIA Corporation (NASDAQ:NVDA) is the leading designer of graphics processing chips (commonly known as GPU’s- graphics processing units), required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming- focused chip vendor to one of the largest semiconductor/software vendors in the world, dominating the core secular growth markets of gaming, data centers and professional visualization. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. For 2021 the company generated 61% revenue growth to $27 billion, expanded its EBITDA margins to over 44% and generated over $8 billion of free cash flow. Over the past five years, the company has generated a cumulative $23 billion of FCF after cumulative capital expenditures of less than $4 billion.
We expect future growth to remain robust as NVIDIA Corporation (NASDAQ:NVDA) chips and software are critical to many of the core technologies being adopted globally, including cloud computing, virtual reality and advanced artificial intelligence. As with NFLX, we took advantage of the over 40% recent drop in the company’s shares over the last several months to initiate a small position.”
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Disclosure. None. 10 Stocks to Buy as Senate Passes Inflation Reduction Act is originally published on Insider Monkey.
