Winners and Losers in a Democratic Administration

The election is over and no matter how you feel about Obama, he will be the next U.S. president. Some economists are projecting total government borrowing in excess of $1.5 trillion in the fiscal year ending next September. Such a sharp increase in new debt could push up interest rates and continue the downward pressure on the stock market. Even in a down market, there are always winners. Let's take a look at some of the possibilities:

Energy

There is a belief that the new administration will channel money to the energy sector, such as solar energy and hybrid cars, as a way to stimulate the economy. Some possible beneficiaries include:

• Suntech Power Holdings (STP)
• SunPower Corp (SPWRA)
• Energy Conversion Devices Inc. (ENER)

Defense

Against conventional wisdom, U.S. defense contractors tend to do well Democratic administrations. Winners would include:

• Lockheed Martin (LMT)
• Northrop Grumman (NOC)

Pharmaceuticals

With the credit crisis in the forefront, healthcare reform will likely be low on the priority list. That should provide stability for drug stocks and to investors seeking safety after a rough ride in the market. Stocks to consider:

• Abbott Laboratories (ABT)
• Eli Lilly and Co (LLY)
• Pfizer Inc (PFE)

Financials

Banks may be the big losers in an Obama administration. There could be pressure put on banks to help borrowers avoid foreclosure by renegotiating mortgages. Also there could be pressure to lower fees on credit cards. Some banks that will feel the pressure include:

• Bank of America Corp./Countrywide (BAC)
• J.P. Morgan Chase & Co. (JPM)

Times certainty will be different. However, it is important to remember a sound dividend investing philosophy historically has withstood the tests of time through both Democratic and Republican administrations. Don't make the mistake of sitting on the sidelines.

Disclosure: None

Comments

[gebby:]

AmTech notes while the potential impact of the credit crisis and currency fluctuations continue to plague solar stocks, it is becoming clear that the industry's value chain is beginning to rationalize and investors are in the process of determining the topography of this industry with little visibility to macro variables. They continue to believe the long-term secular trend toward clean technology and solar cost reduction are intact and advocate a selective approach to owning solar stocks with a net positive bias on well-capitalized companies with differentiated, low-cost technology. ENER remains one of their top picks in the sector. They believe bears are potentially underestimating the facility of ENER's customer base to do business in a difficult environment. They continue to believe balance of system savings, superior electricity production per watt, already discounted pricing, and USD denominated contracts will support revenue and margin expectations. stay with solars, sol, yge, solf ldk as well

2008 Nov 07 09:08 AM

[Chris B:]

I don't know. With gasoline now selling for $1.99 (!) and natural gas following suit, I suspect that the political motivation to push green tech will soon evaporate in favor of other priorities. It will be much like the 90's, where despite Dems in Congress and the White House, low fossil-energy prices crushed the development of solar, wind, hybrids and electric cars. When political wishes and economic reality collide, guess who wins. Those dreaming of a Green Works Progress Administration in an era of $2 gas might consider just how speculative such an idea is.

Of course, if Chindia fails to implode and continues to grow - then long-term all bets are off. If the bubble-era warnings are true, they will soon gobble up energy and commodities faster than they can be produced in the world market. In this scenario, we will have cut our investment in green tech just in time to get nailed with commodities bubble part 2.

Maybe that's why OPEC takes their profits in spurts rather than consistently. They bankrupt each generation of green tech companies before they can get a toehold in the market, guaranteeing continued dependence on their product.

2008 Nov 07 10:38 AM

[Lin:]

Chris B

You are correct .

2008 Nov 07 06:40 PM

[lefty37:]

Can't help but notice that gas has lowered in our area to around $2 per gallon, and our traffic now has grown and all are driving faster.
As a consuming public, we're not very smart, are we!

2008 Nov 08 08:28 AM

[frflyer:]

Chris B

What happened in the past with renewable energy vis a vis oil prices will not be a good indicator of what will happen now. The world is much more aware of peak oil, global warming and the need for change. Obama's number one priority is investing in renewable energy. He understands that it will kill three birds with one stone. economy, energy, environment.
It will create jobs and boost the economy, while moving us away from fossil fuels. Oil is killing our economy. Have a look at the hidden costs of oil at www.setamericafree.org...

They also have an energy plan at:
www.setamericafree.org...

My new blog dispells some of the disinformation we are being fed about the future of energy.
energysolutionswecanbe.../

Powers that be would have us believe that renewable energy can't power the country. Americans are woefully misinformed or uninformed about the potential of solar and wind and other renewables. Nuclear power is not sustainable, perhaps less so than oil is.
And it is not clean or safe, no matter what disinformation we are being fed.
See The Lean Guide to Nuclear Energy at

www.theleaneconomyconn...

for more information:
www.cleanwisconsin.org...

Why would we invest in energy sources that require fuel, when solar and wind will never, ever need any fuel to prospect for, mine, transport, store, burn, clean up the mess from, or fight wars over.
Clean coal will take ten to fifteen years to develop. By then solar and wind will have decade or more head start. And clean coal won't be cheap.

2008 Nov 08 02:33 PM

[nyka:]

I fee just fine about Obama. So do a record number of voters. Problem with that?

2008 Nov 08 07:30 PM

[PeteK:]

Oil & Solar dance up & down together.
That's the best indicator.
Trust politicians ? Don't be rediculous !!

2008 Nov 09 02:12 AM

[Chris B:]

That's a valid point frflyer. The oil crisis of the early 70's resulted in rising fuel economy in US vehicles well into the 80's, as well as the 55 mph speed limit, which saved massive amounts of fuel.

However, the latest oil price spike was no 1974. $4 gasoline only lasted for a couple of months rather than years, resulted in no real shortages or rationing, resulted in few conservation measures, then returned to levels last seen in the heyday of the Chevy Tahoe as the US economy collapsed (cause or effect? You decide :).

Memories of this event might last a couple of years. But the pattern again and again is that US consumers eventually relapse to the land barges they love when gas gets cheap. And voters demand that 70mph speed limit.

The one thing Obama could do to change this dynamic is to enact a permanent fuel tax similar to those in Europe (probably with offsetting income tax breaks). The Republicans living in the exurbs would roast him for doing this, so it will never happen.

He could also push through the development of light rail in all major and medium-sized cities. However, early indications show that those funds will be allocated to bailing out Detroit instead. What vision!

Overall I agree with your points about the true cost of energy. Dead soldiers, pollution-related disease, trillions in war expenses, and the arming of our enemies are never counted in the price per barrel quote.

2008 Nov 10 02:41 PM

[clywelch:]

Well, I agree up to the point on healthcare reform being pushed back in an Obama administration. Remember the supporters that put him there like Ted Kennedy and Hilary Clinton who holds healthcare reform near and dear. Not to mention that is the big sell/promise to Americans that helped to get him elected.

In fact in one of Obama's first press conferences post election he discussed chnages to healthcare specifically mentioning the big Drug Kinpins. No, I think the Big Pharmas head will undoubetedly be on the chopping blocks within the first 100 days.

2008 Nov 14 07:57 PM