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Twelve days before the 1880 U.S. presidential election, a scandalous letter emerged.
It was allegedly written by James Garfield, the Republican nominee for the White House. And it was a bombshell: It said that Garfield supported unrestricted Chinese immigration – one of the hot-button issues of the day.
Democrats printed half a million copies of what they called Garfield’s “death warrant” and distributed them in tightly contested states like California. It became one of the first major instances of an “October surprise.”
Sometimes, these late-game shocks have worked. Jimmy Carter and Ronald Reagan were neck-and-neck going into the final weeks of the 1980 election; the Iranian hostage crisis dominated the news in the election’s closing days, shifting the election in Reagan’s favor.
Other times, the surprises don’t pan out. Garfield himself managed to squeak by and win the 1880 popular vote by 0.02%, becoming America’s 20th president. (The letter also proved to be a fake.)
Yet, one thing is certain: These October surprises can create lasting impacts to the economy and beyond, no matter who wins the election.
In a new special event, Midterm Mayhem, InvestorPlace Senior Analyst Louis Navellier teams up with legendary investor Marc Chaikin to explain these unusual developments as we head toward Election Day.
They believe a series of October surprises will converge, changing the conversation and catching investors flat-footed.
You can , which goes live Tuesday, September 29, at 10 a.m. Eastern.
In the meantime, I’d like to discuss three companies that highlight how lasting this year’s potential October surprises could be.
The Deepwater Play
Over the past several weeks, we’ve seen oil prices shoot up as U.S.-Iran tensions have reignited… and then fall again on a potential peace deal.
I expect we’re only in a temporary lull.
That’s because Iran has an incentive to raise oil prices going into the U.S midterms. They want the president to lose control of Congress after the election, since a split government would make it more likely for America to end its military campaign and start negotiations. Commentators from both sides of the political spectrum agree.
So, even if America manages to push oil prices down in the near term, the physical damage to oil infrastructure in the Middle East (both existing and upcoming)should keep global prices higher for longer.
One of my top picks here is Transocean Ltd. (RIG), a firm that scores a “B” in Louis’ Stock Grader system (). The company is the world’s largest leaser of “floater” oil rigs (27 vessels) and owns another seven harsh-environment semisubmersibles. These platforms are used when ocean water is too deep to anchor regular rigs into the seabed.
And business is booming.
Transocean has seen revenues surge 40% in the past two years. No new drillships have been ordered since 2014, and a previously oversupplied market is now swinging into deficit. Industry analysts believe that high-end floaters have been fully contracted through late 2027, allowing Transocean to charge fat premiums for renting its ships and achieve utilization rates “well into the 90s,” according to its CEO.
In other words, the company is winning from both high day rates and high utilization.
Transocean additionally announced a merger with rival Valaris Ltd. (VAL) earlier this year. The all-stock deal will create the world’s only full-spectrum offshore driller at scale: $10 billion of backlog, $200-plus million of cost synergies, backed by a fleet of 33 ultra-deepwater drillships, nine semisubmersibles, and 31 modern jack-up drilling rigs.
Now, I must note there is some concern that the merger will not happen. The Department of Justice is reviewing the deal for antitrust issues, which is why shares of both firms trade at somewhat depressed levels.
However, the current administration has generally favored merger requests in the energy sector, and I give it a high chance the tie-up will go through. In addition, Valaris’s board accepted a stock-only deal – a fantastic endorsement of Transocean’s stock by the most informed counterparty in the industry.
Perhaps most importantly, RIG is a surprisingly conservative oil play. Drilling rigs are leased on long-term agreements, and replacement rigs take four-plus years to build.
And so, even if an “October surprise” doesn’t materialize, and the U.S.-Iran conflict ends instead, Transocean still looks attractive. Shares are likely worth near $8.50 if the merger goes through and $6.50 if not. Both signal upside from today’s $5.50 prices.
The More Speculative Oil Play
Investors with greater ability to take risks should also consider Oil States International Inc. (OIS), a midcap firm with three lines of business:
- Offshore Manufactured Products. This segment makes up 60% of revenues and is the company’s crown jewel. Products include large-bore connectors, subsea infrastructure, cranes, and other components for deepwater developments.
- Completion & Production Services. This is 15% of revenues, and is what remains after a deliberate shrinkage of the company’s on-shore business. The segment mostly helps support oil facilities along the Gulf Coast.
- Downhole Technologies. This historical problem child of Oil States makes up 25% of revenues, and has seen a recent turnaround this year after launching new platforms. This segment builds the small, specialized tools that go inside an oil or gas well to help it start producing.
Over the coming years, I expect Oil States’ offshore business to boom. Offshore drilling is starting a multiyear upcycle, and projects in the Gulf of America, Brazil, Guyana, and West Africa are already being pulled forward to help oil majors diversify away from the Middle East. Potential escalation in the U.S.-Iran conflict will only pull more demand to present-day.
Oil States is also winning contracts from an unusual customer: the U.S. military. Over the past several years, the U.S. Navy has begun buying sound- and vibration-dampening products from Oil States to outfit Ohio-class ballistic missile submarines and more. Military orders now make up 48% of the offshore segment’s record $451 million backlog.
Now, most financial screeners would pass OIS off as a low-quality play. The company is historically not very profitable, GAAP revenues have been shrinking, and cash flow is unstable.
But Louis’ Stock Grader system can see through the noise. It awards OIS an “A” because it is forward looking. This is useful because offshore drilling and military contracts operate on long cycles; bookings today result in negative cash flow in the short run (bad), followed by major revenue growth in the future (good). In addition, the revenue decline at Oil States this year was simply a byproduct of its withdrawal from the less profitable onshore business.
Analysts expect sales growth to flip back positive in fiscal 2027 and adjusted net income to surge 45%. By my reckoning, shares are worth $11 in the base case and $14 in the bull case – a large upside from today’s $8.30 price.
The Media Frenzy
The fiercely contested 1880 election I wrote of earlier was a boon for the media business. Newspapers spent the final days of the campaign printing allegations, denials, and courtroom updates, while political organizations circulated hundreds of thousands of reproductions of the “death warrant” letter.
Today, the winners of election-based advertising and coverage have switched to more modern outlets. Social media… digital advertising… TV… and more. These advertisers are benefiting from an expected $11.6 billion in total political advertising spending. That figure not only surpasses the amount spent in the 2022 midterms, but the 2024 presidential cycle as well. Whatever October surprise happens this time around will be drawing eyeballs… and more advertising dollars as well.
I expect one winner will be Versant Media Inc. (VSNT), the January spinoff from Comcast Corp. (CMCSA) that took many of NBCUniversal’s cable channels (including USA Network, E!, Golf Channel) and digital assets (Fandango, Rotten Tomatoes) along with it. Versant’s most important assets are CNBC and MS NOW (formerly MSNBC).
I first recommended Versant in January as a seasonal stock to buy. The company had just gone through a post-spinoff selloff, laregly because the Comcast was in the S&P 500 and Versant is not. That meant any S&P 500 tracking funds would have been forced to sell shares of Versant, creating a temporary price dip that traders could exploit.
Versant shares would recover to $44 by May, rewarding shareholders with a 34% return – quite wonderful for just five months of investment in a low-beta stock.
A renewed decline back into the $33 range now gives medium-term investors another chance of a double-digit return. Political ad spending is helping lift all boats in the advertising world, and Versant is benefiting by an outsized amount. CNBC has now been a top-10 cable network for four straight months, and MS NOW has grown audiences for seven consecutive months going into the midterm election cycle.
So, even though cable-cord cutting reduced distribution by 6.3% in the past year, advertising revenues have gone down only 0.6% (and should rise from here as midterm ad spending reaches a frenzy). Versant is worth roughly $44 in the base case and $55 in the bull case.
The Real October Surprises to Watch
The three companies I mentioned here are a “heads-I-win, tails-I-still-win” way to play a potential October surprise. More oil infrastructure in the Middle East will get damaged in the coming month, no matter what the U.S. decides to do. And political campaigns will be spending small fortunes on TV ads this year.
Transocean, Oil States, and Versant should come out ahead, regardless of who takes control of Congress this November.
But the hedging also reduces some upside, since you’re not making a direct bet on exactly what will happen.
That’s why it will be worthwhile to tune into Louis Navellier and Marc Chaikin’s September 29 event, Midterm Mayhem, where they’ll discuss specific October surprises that could catch the market off guard. They’lll also reveal two of their favorite stocks to benefit from their predictions and two companies to avoid.
I’ll see you here next week.
Thomas Yeung, CFA
蜜桃传媒 Analyst, InvestorPlace
