Post by Bozur on Nov 6, 2008 12:19:11 GMT -5
Which Stocks Will Soar Under an Obama Presidency?
time.com — So which shares would rise the most during a Barack Obama stretch in the White House? It's actually easier than it might seem to pick the right investment themes for a politically charged run. Click through to find three sectors and stock picks that stand to benefit when Obama is sworn in on Jan. 20, 2009. More… (Business & Finance)
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Which Stocks Would Soar Under an Obama Presidency?
By STEPHEN GANDEL
Under George W. Bush, oil stocks became gushers. Technology stocks lit up during the Clinton presidency. So which shares would rise the most during a Barack Obama stretch in the White House? It's actually easier than it might seem to pick the right investment themes for a politically charged run. After all, you didn't need to be Warren Buffett to figure out that Exxon Mobil or Chervon would benefit from a Texan president, or that defense stocks would flourish under Reagan. Of course, you would have needed a well-polished crystal ball to have known to load up on Internet stocks in late 1992, as Clinton's presidency became a reality. Yahoo, after all, didn't go public until 1996. Still, investment professionals across the country are hopeful that they can figure out which companies — and stocks — would benefit most from an Obama presidency. Already, according to International Strategy & Investment, an economic forecasting firm, a portfolio of Obama-friendly investments has outperformed McCain stock picks by nearly 12% since August.
Click through to find three sectors and stock picks that stand to benefit if Obama is sworn in on Jan. 20, 2009.
Health Care
Obama has said that he would like to make health care affordable for many of the 47 million Americans who are not currently insured. On the face of it that would seem like a bad thing for the industry because lower costs for payers means lower profits for providers. And indeed, large health insurers like UnitedHealthcare or Aetna, as well as many of the drug companies, might suffer under the Obama plan. But Stanford Group thinks an Obama presidency would help at least one sector of the health care industry — hospitals. That's because the uninsured are one of many hospitals' biggest cost. So more insured people is a win for hospitals.
Pick: No company should benefit more from Obama's effort to get more people insured than Community Health Systems (ticker: CYH), which is the largest publicly traded hospital company in the country. What's more, many of the hospitals that Community Health administers specialize in emergency care. And emergency rooms are often where uninsured people wind up being treated. Some analysts are concerned about Community Health's ability to pay off its debt at a time when more people will be out of work, and probably uninsured. But while the company has $6 billion in debt, it also has $9 billion in assets. Gary Lieberman, the health care analyst at Stanford Research Group, rates Community Health's shares, which recently traded for $20.50, a buy. "Community Health Systems and indeed any hospital with an emergency room would benefit greatly if Obama could get more people health insurance," says Lieberman. "The question is whether he can make it happen."
Infrastructure
A major component of Obama's economic recovery plan is to create as many as 2 million new jobs rebuilding and repairing the nation's bridges and tunnels. He would like to start something called the Infrastructure Bank, which would be an independent organization that would decide what projects to pursue, and fund it with as much as $60 billion of federal money over 10 years. But some experts say the nation's ailing highways and transportation system could use significantly more funds, as much as $1.5 trillion over the next five years, to keep it in working order. So it is likely that Obama would end up spending more than he is right now projecting. International Strategy & Investment says infrastructure plays are the best way to invest in an Obama presidency.
Pick: Vulcan Materials (ticker: VMC) is the largest U.S. producer of sand, crushed stone and gravel — key ingredients in making roadways. So it is sure to benefit from any building boom. The company's shares have slid, to a recent $54 from a high of $120, as the end of the housing boom has lowered the demand for construction materials. Still, the stock is not particularly cheap. Vulcan's shares have a price/earnings ratio of 20, based on expected earnings. That's considerably higher than the average valuation of the stocks in the S&P 500 index, but Vulcan investors are paying up for consistency. The company is one of a very few that have increased its dividend every year for the past 40 years.
Alternative Energy
Obama has said that he would like to spend $150 billion over the next 10 years developing alternative energy. "It's pretty clear that he wants this to be his legacy," says Robert Froelich, who is the chief investment strategist of Deutsche Bank's asset management division. All that R&D money should help companies that are developing such things as hydrogen fuel cells and the technology to harness the power of ocean waves. Problem is that stuff is a long way off before it can be widely used, and most of the companies developing the technologies are small and hard to invest in. What's more, it's not clear which alternative will become the alternative. So your best investment tactic here, professional investors say, is to buy the shares of a company that will benefit from an increase in demand for the only biofuel that is already widely available — ethanol.
Pick: Archer Daniels Midland (ticker: ADM) is the world's largest producer of corn, which is one of the main sources of ethanol. Many states already require gas makers to include ethanol in the blend you get at the pump. Obama would like to up the percentage of ethanol that is used in the production of gasoline. That means we would need to produce more ethanol, driving up the demand for corn. ADM's shares recently traded for $22. Of course, a bad economy could hold down demand for gas and ethanol for now. But an analyst at Soleil Securities recently began recommending ADM, saying the shares could reach $25 in the next year.
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