Forget Traditional ‘Red Or Blue’ Plays; Twitter Is My Top Election-related Stock

It happens every four years. Everyone on Wall Street starts sizing up the presidential candidates to gauge the resulting economic opportunity and how various stock sectors could be affected.

Wind back to 2015 and we were talking about cement stocks and trying to figure out whether Silicon Valley would do better or worse in a Trump era. Since then, the building boom hasn’t happened, while the so-called FANG stocks of Facebook (NASDAQ: FB), Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX) and Google (NASDAQ: GOOGL) reached for the stratosphere.

But when people already are asking me who I think will win the 2020 election, I don’t pick a politician or even a political party. Whoever takes the White House, Twitter Inc. (NASDAQ:TWTR) will bring home plenty of green before the votes are even counted.

I’m not talking about campaign advertising. Back in 2016, Facebook Inc. (NASDAQ:FB) captured six times as much political spending as Twitter and that’s unlikely to change even if Facebook’s policy reforms have any chilling effect at all.

Twitter is simply the place where insiders debate policy positions they aren’t likely to change. Nobody identifies as an undecided voter there.

Even in last year’s midterm elections, less than $0.01 out of every $1 in campaign ad budgets went to Twitter.

(Republicans vastly preferred Google and President Trump himself hasn’t spent anything on Twitter yet. Why buy reach when you can reach millions every day for free?)

Maybe that will change later this cycle once the Democrats pick a nominee and get serious about tackling Trump on his digital home turf. Right now, however, I’m not counting on Twitter receiving any more than $10 million in political revenue for the entire cycle.

But the sheer amount of noise around what’s likely to be both a confused Democratic primary and a bitterly contested head-to-head fight is good for advertisers who simply want to reach an engaged audience where the action is.

Twitter’s chief financial officer said something amazing back in 2016, “We really need to have a (presidential) debate on Twitter every day for it to meaningfully improve the quarterly metrics.”

That’s the world we live in now. Every day is a live presidential debate on every topic under the sun. Twitter is where the national policy debate happens. And because you need to be there to keep up with the conversation, engagement has soared.

Back in mid-2016, 319 million people checked Twitter at least once a month and the size of that audience had effectively hit a wall, at best growing 1 percent every quarter.

As the audience stalled, so did revenue. People weren’t Tweeting much more than they did in 2015, so there wasn’t much urgency for advertisers to focus on the platform. Top-line growth slowed to 1% a year and expensive original programming ate a lot of the cash coming in.

Three years later, Twitter has 330 million monthly users on the platform even after dumping 70 million fake and abandoned accounts. They have generated $70 million more quarterly revenue than they did before the election.

And from a base of practically zero, even a little campaign spending can really move the needle in the right direction. We aren’t counting on it, but if an electoral lift happens, it only would accelerate the momentum that’s already here, no matter how the presidential race goes.

Compare that to Facebook, which took in $80 million of a $750 million political ad spend back in 2016. That’s a lot of money, but even then the campaigns were barely a drop in a $27 billion ocean of revenue that the dominant social network drew from all sources.

Facebook has grown and diversified beyond the four-year political cycle. The much smaller Twitter is right where it needs to be to tell that story again, but with a twist.

Twitter is at the center of the chatter now. Wherever people are talking, the sales team will figure out how to make money. While I can’t predict anything about the coming campaign season, we know a lot of people will talk about it on Twitter.

If they aren’t, they’ll have the 2020 World Cup and the Olympics to keep them chattering. Twitter has barely monetized the 80 percent of its audience that live outside the United States. It is a huge opportunity for future shareholders to enjoy.

That said, never let anyone tell you Twitter is down because Chinese trade talks have broken down. Beijing bans the site. There’s zero official audience risk and zero revenue at stake here. How many other companies can say that?

Whether you’re looking to invest in a company that will do well in the election cycle or simply to talk about politics, the story starts with Twitter. My Turbo Trader and High Octane Trader subscribers have already made a lot of money approaching this stock from various angles.

A lot of my favorite “election stocks” are like that. They aren’t so much about who wins or what the top candidate promises to do with power. The stocks aren’t even about getting results in Washington.

They’re about the business of America continuing like clockwork through the noise. Big technology. Big health care. Big banking. Big retail. Big aerospace.

Every four years, people talk more about politics more than usual and new votes are cast. But the rest of the time is when the real business of the nation gets done and investors share in the rewards.

Everything else is just another form of chatter. Maybe Twitter figures out how to monetize that, too.