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Ron Paul is a Republican Presidential candidate from Texas, and a former OB/GYN doctor. He has served in the U.S. Congress for 40 years and has a loyal grassroots following. He has placed third in Iowa, and second in New Hampshire, and has garnered 161,060 votes compared with front runner Mitt Romney, who has won 294,826 votes. More votes have been cast for Paul than Rick Santorum.

South Carolina New Hampshire Iowa Vote Total
Romney 167,279 97,532 30,015 294,826
Gingrich 243,153 23,411 16,251 282,815
Paul 77,993 56,848 26,219 161,060
Santorum 102,055 23,362 30,007 155,424

Most political pundits give Paul no chance, but he is running in third after South Carolina.

Now that Romney is in the lead, Gingrich and other Republicans are attacking him for his role in Bain Capital. Gingrich also has political baggage.

Romney's wealth and Gingrich's character could lead one or both of them to collapse in the polls. While Paul would still be a long shot it is far from an impossibility. Romney and Gingrich falling from the top of the polls could help Santorum or another dark-horse cantidate.

As investors we need to pay attention to politics because they affect industries and individual stocks. In the case of a Paul presidency, defense contractors would be particularly hard-hit. Below is a list of the top 10 US defense contractors by revenue in 2011.




2011 Defense Revenue in Millions


Lockheed Martin Corp.




Northrop Grumman Corp.




Boeing Co.




General Dynamics Corp.




Raytheon Co.








L-3 Communications Corp.




Science Applications International Corp.




DynCorp International Inc.




Hewlett-Packard Co.



The two defense contractors I would expect to be most negatively affected by a Paul administration are Raytheon and L-3 Communications. Both companies derive a high percentage of their revenue from defense spending and products or services, which do not align with Paul's libertarian politics.

Raytheon is a top 10 government contractor that derives 91% of its revenue from defense spending. Raytheon has profited from the various military incursions executed under the Clinton and Bush administrations and continued by Obama. However, Paul's staunch commitment to ending these conflicts would inevitably force Raytheon to find other markets for the guided missiles so often used in the military actions of recent decades. Paul opposed the Iraq war from the beginning. In a near-prophetic speech before Congress in October of 2002, he laid out his objections to the conflict and it is reasonable to expect continued opposition to similar actions.

Paul, a steadfast and vocal opponent of torture, will surely not be buying Raytheon's "Ray Gun" product (which has been tested on prison populations).

L-3 Communications is also a top 10 government contractor with contracts for Command & Control, Government Services and Specialized products. Spun off from Lockheed Martin (NYSE:LCM) in 1996, the company derives 82% of its revenue from defense spending. L-3 Communications provides extensive surveillance services to the government.

L-3 describes itself as a "prime contractor in Command, Control, Communications, Intelligence Surveillance and Reconnaissance systems, aircraft modernization and maintenance and government services." L-3's main surveillance abilities come from the 2006 acquisition of TRL Technology. In Congress, no one was a stronger defender of personal liberty than Ron Paul. Paul's commitment to civil liberties would seriously curtail the recent expansion of domestic and international surveillance activities, and thus, L-3's profits.

Of the other top 10 defense contractors, I believe Lockheed Martin , Boeing and Hewlett-Packard Co. are diversified enough to make reasonable profits, even with reduced government spending under a Paul administration.

On the positive side, I point out two companies that could benefit from a Paul Presidency.

The first is the gold producer Barrick Gold (NYSE:ABX) mentioned in the recent article on Seeking Alpha by Takeover Analyst.

Ron Paul is one of the few politicians who favor a return to a gold standard and the repeal of laws outlawing the use of gold or silver as money. If the U.S. returns to a gold standard or, at least, allows the competition between the dollar and gold, I believe the gold mining companies would benefit long term. Barrick Gold has potential to benefit as does the (NYSEARCA:GLD) and other producers.

The other company which could benefit from a Paul Presidency is FedEx (NYSE:FDX). Paul favors removing the monopoly on first-class mail now afforded the U.S. Postal Service. If that monopoly were relaxed, FedEx could find a lucrative new market to exploit.

In closing, Ron Paul's deeply held, unwavering libertarian values would cause broad ripple effects (positive and negative) on U.S. equities. While I personally feel that the return to balanced budgets and deficit reduction are vital for the U.S. economy, I acknowledge that an initial shock to the already-battered financial markets would be unavoidable. Eventually, however, the real winner could be the individual, be he an investor or garbage truck driver, as I believe true Constitutional government will most-assuredly result in robust, unprecedented long-term growth. I have not written this article merely to tout Ron Paul as a presidential candidate, but to point out that, as investors and traders, we must be ever-aware of the political landscape and its potential to shape our financial destiny.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: The above is not to be considered accounting or investing advice.