Obama vs. Romney-Where Should You Invest

by Darnell Brown on October 17, 2012

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When I turned on the television this morning the first news story that caught my eye was about the U. S. presidential election. Apparently the latest polling data shows that the election outcome will be extremely close. As an investor, I try to think futuristically, and I wondered which stocks would benefit from a Barack Obama win, versus which stocks which stocks would benefit from a Mitt Romney win.

When I think about Obama’s presidency, I cannot help but think about his Signature Legislation the “Patient Protection and Affordable Care Act” also known as “Obamacare”. If Obama wins the election Obamacare will remain the law and large hospital chains will benefit. Most stock analysts believe that large hospitals chains would benefit from an Obama win because Obamacare would reduce the cost for hospital emergency rooms, which must now treat uninsured patients with pre-existing conditions for free. Two of the large healthcare stocks that could benefit if Obama wins are:

HCA Holdings (NYSE:HCA)priced around $31.52 week stock performance +41.8%.Price to earnings ratio 5.02.

Market Cap $13.6 billion.

Year-over-year quarterly earnings growth 70.7%.

Community Health Systems Inc. (NYSE:CYH)priced around $28.52 week performance +48.8.Price to earnings ratio 11.67.

Market capitalization $2.5 billion.

Year-over-year quarterly earnings growth 23.1%

 

A second sector that will benefit from a president Obama win is the Pharmaceutical sector. Large pharmaceutical companies often develop and produce drugs that are so expensive that the average individual cannot afford to purchase them. Therefore, they benefit when individuals are insured and can have the government or insurers pay for their pharmaceutical products. Under Obamacare, more Americans will be insured, and that should benefit pharmaceutical companies. Two of the most promising stocks in the pharmaceutical sector are:

Pfizer Inc. (NYSE:PFE)priced around $26.52 week performance +34.4%.Price to earnings ratio 18.8.

Market capitalization $187.6 billion.

Year-over-year quarterly earnings + 24.6%.

Dividend Yield 3.5%.

Sanofi (NYSE:SNY) priced around $44.52 week performance +25.25%.Price to earnings ratio 13.74.

Market capitalization $113.6 billion.

Year-over-year quarterly earnings +16.4%.

 

A third market sector that would benefit from a President Obama win is the alternative energy sector. The president has voiced his support for renewable energy sources. Renewable energy companies are those that utilize solar, wind, nuclear and geothermal sources of energy. Two companies that are likely to benefit if President Obama is re-elected are:

First Solar (NASDAQ:FSLR) priced around $22.First solar designs, manufactures and markets solar energy panels.52 week stock performance -58.3%.

Market capitalization $1.9 billion.

Forward price to earnings ratio 5.57.

Year-over-year quarterly earnings growth 81.5%.

Next Energy Inc. (NYSE:NEE) priced around $70.Next Energy is the biggest supplier of wind and solar power in the U. S.52 week stock performance 26.8.

Price to earnings ratio 13.5.Year-over-year quarterly earnings growth 4.7%.

Market capitalization $29.2 billion.

 

If Mitt Romney wins the election the stocks that would benefit from his administration’s policies would differ significantly from those that would benefits under a president Obama administration. Mitt Romney says that if he wins he will repeal Obamacare. One of the provisions of Obamacare is a 2.3% excise tax on the sale of medical devices. If Obamacare is repealed medical device makers could benefit. Two medical device suppliers that could benefit from a Mitt Romney win are

Stryker Corporation (NYSE:SYK) priced around $52.52 week stock performance +7.7%.Price to earnings ratio 14.7.

Year-over-year quarterly earnings growth 5.3%.

Market capitalization $19.8 billion.

Zimmer Holdings Inc. (NYSE:ZMH) priced around $63.52 week stock performance +19.8.Price to earnings ratio 14.7

Year-over-year quarterly earnings growth 5.3%.

Market capitalization $10.9 billion.

 

Mitt Romney has said that he would overturn the Dodd-Frank financial reform law which increased the government’s oversight over financial institutions. If Dodd-Frank was overturned large financial institutions would benefit. Two financial stocks that stand to benefit from a Mitt Romney victory are:

J P Morgan & Company (NYSE:JPM)priced around $42.52 week stock performance +34.1Price to earnings ratio 8.9.

Year-over-year quarterly earnings growth 33.9%.

Market capitalization $171 billion.

Wells Fargo & Company (NYSE:WFC) priced around $34.52 week stock performance +40.2.Price to earnings ratio 10.6.

Year-over-year quarterly earnings growth 21.8%.

Market capitalization $178.7.

 

In his stump speeches, Mitt Romney has shown compassion towards energy companies that use coal fired power plants. If Romney wins the election he would probably ease environmental regulations on the use of coal. That would benefit coal companies and the railroads that ship the coal. Two additional companies that would benefit if Mitt Romney won the election are:

Union Pacific Corporation (NYSE:UNP) $120.2352 week stock performance +35.5Price to earnings ratio 15.5

Year-over-year earnings performance +27.6

Market capitalization $56.9 billion.

Consol Energy Inc. (NYSE:CNX) priced around $8.52 week stock performance -16.3%.Price to earnings ratio 12.8Year-over-year quarterly earnings growth +97.4%.

Market capitalization $7.8 billion.

 

There has been some concern about defense spending, especially in light of the “sequestration” law which would cut defense spending and go into effect on January 2nd.  Mitt Romney has pledged to increase defense spending. If Mitt Romney is elected, stock’s tied to U.S. military spending should benefit.  Two companies that would benefit from increased military spending are:

Lockheed Martin (NYSE:LMT) priced around $93.52 week stock performance +24.4.Price to earnings ratio 10.9.

Year-over-year quarterly earnings growth 5.3%.

Market capitalization $29.8 billion.

Textron Inc (NYSE:TXT) priced around $26.52 week performance +41.6%.Price to earnings ratio 18.8.

Year-over-year quarterly earnings increase 91%.

Market capitalization $7.3 billion.

 

History has shown that the stock markets perform better under Democratic Presidents. However, historical price performance is no predictor of future performance. Also, candidates pre-election promises do not always pan out once they take office. The purpose of this article was to show how the policies of the two candidates could affect certain sectors of the stock market.

Investors must take the time to consider each stock’s unique circumstance’s before making stock decisions.

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This post was written by...

– who has written 15 posts on Excess Return.

Darnell Brown is an accountant with over 20 years of auditing experience. He has worked in both the private sector and for the United States Government. He currently works as a freelance writer and has written numerous financial articles for the investmentunderground.com website.

{ 2 comments… read them below or add one }

Roger @ The Chicago Financial Planner October 20, 2012 at 11:08 am

Nice article and interesting reading. I think the last two paragraphs are the two most important ones for investors.

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Darnell Brown October 30, 2012 at 7:59 am

Hi Roger

This is Darnell: You are right the last two paragraphs are the most important. There is no way to be sure that these guys can live up to or will even try to keep the promises that they made during their election campaigns. For instance Mitt Romney is now saying that he likes the popular portions of Obamacare. Who would have guessed? That change in tactics makes this article look dated. I am sure that there will be additional changes in the future.

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