Making money with an Obama portfolio
Posted
Jun 06 2008, 11:18 AM
by
Robert Walberg
Rating:
With Sen. Hillary Clinton expected to officially concede on Saturday, Sen. Barack Obama has finally secured his party's nomination for president. As such, the time has come for investors to start thinking about how the November election might impact their portfolios. In what is sure to trigger a response from many of you, it is my belief that Obama will win and win big. Before I get to what stocks might benefit from an Obama presidency, let's take a look at why he will win.
First and foremost my prediction has nothing to do with party preference or policy issues. It has to do with simple math and if you are into electoral math, as I am, you need to take a look at Web site FiveThirtyEight.com. While the site suggests that the race will be extremely close, similar to the past two presidential elections, if you dig a little deeper you see that if the Obama can increase the turnout of young and African-American voters by as little as 20% from the totals achieve last election, he wins handily. Based on the huge turnout effort in the primaries, Obama's ability to raise money and the strength of his campaign team, I think it's very likely he will get the turnout necessary to take at least seven of the 10-12 swing states, giving him more than 300 electoral votes -- well above the 270 needed to win the White House.
Okay, enough of why Obama will win. How might his victory impact your portfolio? First things first: an Obama win could trigger a end-of-year sell-off in stocks. Historically, the S&P 500 rallies in election years with an average gain of over 12% -- with most of that gain traditionally coming in the last six months. So why will the market's intiail reaction to an Obama presidency be to sell-off? If elected, Obama plans to raise the capital gains tax to 25% from 15%. Fear of a higher tax on gains could trigger investors to take profits in 2008 to avoid the higher tax.
That concern aside, there are still going to be a number of sectors that get a boost from an Obama victory. Based on his stated policy proposals, some industries poised to benefit include alternative energy, generic drugs, education financing, general construction, and technology. Among the losers will be health care (HMOs, big pharma and hospitals), defense and banking (increased regulation).
Based on these assumptions, it's time to pick my Obama portfolio. So if you think, as I do, that Obama will win, here are 10 stocks to buy now: EMCOR, Sterling Construction, Caterpillar, Barr Labs, Forest Labs, Fannie Mae, Freddie Mac, First Solar, MEMC Electronics and Corning.
(Disclosure: Some of my clients hold positions in EME, STRL, BRL and WFR.)
