I will not get into any sort of political debate, but the question continues to come up about what stocks could benefit from whoever wins the White House. Keeping the focus on investing, I decided to give some thought to which stocks could benefit by the election of either candidate.
The main issues for investors, especially income seeking investors, is how we can achieve a more secure income stream in a rather tenuous time. The "fiscal cliff" tax issues, healthcare issues, the entitlement issues, and the economy issues, from either party, could affect our decision making when it comes to which stocks to hold based on who actually gets elected.
If Obama Is Re-elected
Since the Affordable Care Act has been upheld by the Supreme Court of the USA, if Obama is re-elected, I believe there will be absolutely no battle to repeal the law. The reason I believe that, is that most of the larger elements of the law will begin to take affect around 2016. That will be when Obama will be out of office and the opponent's of the law can begin arguing about it at that time.
In this respect, at least for the next four years, the big winners of the Affordable Care Act will ironically be the healthcare sector stocks that benefit from the law itself.
I like two securities here:
Health Care REIT Inc. (HCN) Price: $60.24/share, Dividend Yield: 5.05%, ESS Rating: Bullish
- $20 billion enterprise value, makes it huge.
- An ultra low Beta of .64
- Year-over-year revenue growth of about 23% (even though it had a dip in earnings).
- A silly forward P/E of about 15.50 vs a trailing P/E over 73.50
- 73% of all outstanding shares are held by institutions.
Obviously, the business that it is in enables it to capitalize on the expanding needs of the healthcare facility sector. Since it is already in the middle of this business, HCN will obviously benefit.
Here is a business summary fro Yahoo! Finance:
Health Care REIT, Inc. is an independent equity real estate investment trust. The firm engages in acquiring, planning, developing, managing, repositioning and monetizing of real estate assets. It primarily invests in the real estate markets of the United States. The firm primarily invests in senior living and health care properties. It invests across the full spectrum of health care real estate, including senior living communities, medical office buildings, inpatient and outpatient medical centers and life science facilities. The firm conducts in-house research to make its investments. Health Care REIT, Inc. was founded in 1970 and is based in Toledo, Ohio with additional offices in Brentwood, Tennessee and Dallas, Texas.
Healthcare Select Sector SPDR (XLV): Price: $40.86/share, Dividend Yield: 2.00%, ESS Rating: Bullish
This ETF is already part of our "Team Alpha" portfolio, and the strength it has is in the diversity of holdings within the ETF. Keep in mind that it might not be just about one stock all the time, and even though the dividend is not where we love it, the exposure to many companies makes this stock a potential winner with an Obama victory.
Here are XLV's most recent core holdings from Yahoo! Finance:
|Top 10 Holdings (60.46% of Total Assets)|
If Either Obama Or Romney Is Elected
One more stock to consider is related to the income tax business sector. Let's face it, taxes will either rise or fall but they will be more confusing than ever in 2013, and going forward.
I for one do not believe that the tax code will be reformed to make it a simple process no matter WHO is elected, so I would add this stock as a tie between the candidates.
H&R Block (HRB) Price: $17.15/share, Dividend Yield: 4.75%, ESS Rating: Bullish
- Forward P/E of 9.48.
- $1 billion in cash.
- A reasonable pay out ratio of 69% to support the dividends well.
- Over 90% of outstanding shares are held by institutions.
Keep in mind that one of the huge issues that H&R Block has faced, is the online sites that make it easy to file taxes. Turbo Tax, Quicken, etc have eaten into the brick and mortar business of H&R Block for more than a few years now, and HRB was slow to react.
Now that taxes might get even more complicated, I believe that taxpayers will want to be face to face with their preparers again. This bodes well for HRB since it has offices around the nation, and if people use them, they could pick up market share again.
As I stated, this is a stock that could benefit no matter who wins the White House.
If Romney Is Elected
With the economy in focus, if Romney wins, the first words that come to mind for me are; "drill, baby, drill."
Romney has repeatedly said that he would make it much easier for the U.S. to meet its energy needs in oil, coal, and natural gas, by helping the big oil companies to drill in areas that they have not been able to access.
As far as I am concerned, this means that some of the largest corporations in the world, in this business sector, will benefit from a Romney victory.
Here are 2 that I like:
Exxon Mobil (XOM): Price: $92.50/share, Dividend Yield: 2.50%, ESS Rating: Very Bullish
- An enormous $430 billion enterprise value.
- A dividend winner for 30 consecutive years of increasing dividends.
- A ridiculously low payout ratio of 21%, which enables them to raise dividends significantly if they decide to.
- YOY earnings growth of 49% even though revenues dipped.
XOM is a core holding of the "Team Alpha" portfolio, and is a must-own stock for the long-term investor. It gives investors dividend increases, and continues to produce in just about every economic climate.
The global footprint in this business sector is simply too huge to ignore and it has enough money to basically do whatever it chooses. Not owning this stock actually confuses me. With a Romney victory, the potential becomes even more magnified.
ConocoPhillips (COP): Price: $57.75/share, Dividend Yield: 4.55%, ESS Rating: Bullish
- Operating cash flow of $18 billion
- A huge $100 billion enterprise value
- An ultra low payout ratio of 31% to support the current dividend with plenty of room to spare.
- A 30% drop in the share price from April 2011 (reflecting weaker revenue and earnings growth).
COP has taken a share price hit with the Phillips 66 spin-off, and drop in revenue and earnings. That being said there appears to be upside potential now that most of the dust has settled.
With a Romney victory, this stock could have some capital appreciation, as well as some interesting dividend increases.
The Bottom Line
No matter what happens on the political landscape, investors will have an opportunity to make some money. Choosing the right stocks based on an election is tricky of course, but I think I have outlined five stocks that should be considered.