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As we get closer and closer to Election Day, there is no greater fear weighing on the public’s mind than the economy. The next U.S. President will inherit an economy in recession, with mounting national debt and systemic investment issues on Wall Street. The magnitude and scope of this financial crisis has been unprecedented, catching America off guard. Our country cries out for leadership in this time of tumult, and it will take someone with strong leadership abilities to bring America out of our current recession and into a brighter future. Hearing that call, both Presidential candidates are offering solutions on how to get the markets back on track. On some points they agree, and on many more they differ, but here we will explore how to build a portfolio that uses the coming election as a uniter not a divider, bringing together a collection of stocks that we believe will prosper no matter who is elected President of the United States of America.

Both Parties Agree: This Strategy Works

There are some that say the stock market fares better under a Democratic President than under a Republican administration. According to CNN, a recent study looked at the seventy-two year period between 1927 and 1999. The study showed that a broad stock index, similar to the Standard & Poor’s 500, returned approximately 11% more per year on average under Democratic Presidents when compared to three-month Treasury bills. By comparison, the index only returned 2% more per year versus the T-bills when Republicans were in office. For example, the stock market was up handsomely during President Clinton’s term from 1993–2000. This appears to support the survey’s findings; however, this rise was mostly due to the internet bubble and the paper wealth that was created in the real estate market. Thus, these statistics fail to illustrate the big picture.

To play it safe, we believe it is best to build a portfolio that will benefit whether a Republican or Democrat were to take office in 2009. There are clearly big differences among Presidential candidates Barack Obama and John McCain; however, we should look at the issues where there is common ground. One of the issues that both candidates agree on is energy policy in that both believe the government should set limits on emissions, meaning that companies that emit below those limits would benefit. Both Obama and McCain also have similar stances on the future of nuclear power. McCain is in favor of a plan to build 45 nuclear power plants, and Obama recently mentioned that he would not take nuclear power off the table as a possible energy source and supports research investment into the safe storage of nuclear waste.

Additionally both candidates appear to be increasing their rhetoric against Iran and the Taliban forces operating in Pakistan. Barack Obama has, in the past, suggested unilateral strikes inside Pakistan. Both candidates stated they will not sit back and allow Iran to develop a nuclear weapon. Thus, though the particulars of both candidates’ views may be different, in the post-9/11 United States the national defense industry should prosper under either nominee. In light of these commonalities, a selection of politic-proof stocks should focus on the alternative energy and defense sectors.

Save the Planet and Savor the Profits

Clean Energy Fuels Corporation (Nasdaq: CLNE) provides natural gas as an alternative fuel for vehicle fleets in the United States and Canada. It designs, builds, finances, and operates fueling stations and fuel supplies. The company recently signed a deal to support airport operations with major airports in Atlanta and Oklahoma City. T. Boone Pickens, the founder of Clean Energy, recently blanketed the airwaves with his message of a clean energy future and even made a trip to Congress to propose his energy plan to save America from its reliance on foreign oil.

For a nuclear power play, take a look at Dominion Resources (NYSE: D), and Exelon Corp. (NYSE: EXC). Dominion is an electric and natural gas utility and operates four nuclear plants on the East Coast. Exelon is a utility service company that generates electricity through nuclear, fossil fuel, and hydroelectric generation. Exelon recently filed an application with the U.S. Nuclear Regulatory Commission for a nuclear site in Victoria County, Texas.

Buying These Stocks Will Help Protect Your Country and Your Portfolio

For a defensive play, Northrop Grumman (NYSE: NOC) is a solid company. Northrop Grumman Corporation provides products, services, and solutions in information and services, aerospace, electronics, and shipbuilding to the military, government, and commercial customers in the United States. Northrop Grumman is also the only builder of aircraft carriers in the United States.  The tenth and final nuclear powered Nimitz class supercarrier, the George H. W. Bush, is slated to enter service in 2009. However, the next generation of aircraft carriers is on the horizon. The Gerald R. Ford CVN 78  is the first ship in the first new carrier class in over 40 years. Northrop Grumman  has received a $5.1 billion, seven-year contract for construction of the CVN 78, which is scheduled to be delivered to the Navy in 2015. The letters “CV” is the hull classification for aircraft carriers and “N” indicates nuclear power propulsion.

All of the above companies are lower due to the current economic crisis that is underway. Clean Energy is currently trading at about $11.00 from a recent high of $20.65. Dominion Resources is currently trading at about $40.00 from its fifty-two week high of $49.38. Exelon is down 40% from its fifty-two week high of $92.13 as the company is trading at about $56.00. Northrop Grumman, currently trading at about $55.00, is down 35% from its fifty-two week high of $85.21.

Healthcare: Agree to Disagree

Although Barack Obama and John McCain disagree on healthcare, there is one company out there that will benefit regardless of who wins the election. Consumer stocks are virtually recession-proof and are always there to fall back on, and there is no consumer company that offers a better or more diversified product portfolio than Johnson and Johnson (NYSE: JNJ). The company engages in research and development and the manufacture and sale of various products in the healthcare field worldwide. Its products, which range from nutritionals to vision care to over the counter medicines, are readily available in nearly any store.

If you have some extra change lying around the house and are looking for a small-cap name, look no further than Drugstore.com (Nasdaq: DSCM). Drugstore.com is the leading online provider of health, beauty, vision, and pharmacy products primarily in the United States and Canada. Currently trading at $1.85, it is a stock worth looking at if you are looking to add a very small-capitalization company to your portfolio. This small-capitalization stock will benefit no matter who becomes President. As the baby boomer population ages and more and more discover the ease of ordering pharmacy products online, Drugstore.com stands to reap the benefits. With a market capitalization of under $200 million it also makes for a prime takeover candidate.

We’re All in This Together

Nevertheless, rather than planning your portfolio in favor of one candidate over the other, invest in what both agree upon. This market has taken us on a roller coaster ride in the past few months, and there is certainly going to be more turmoil in the weeks ahead. However, when the market recovers, the stocks mentioned here will gain no matter who occupies the Oval Office. And having these party-proof stocks in your portfolio will give you some peace of mind as the rhetoric and debates heat up in the weeks ahead. After all, we are only twenty-six days away from Election Day 2008.

Source: A Politics-Proof Portfolio