2012 Election: Which Industries Won When Obama Did, and Which Lost
by 24/7 Wall St. Nov 7th 2012 3:27PM
By JON C. OGG
The election has come and gone: On Tuesday, President Obama won a second term, and the balance of power in Congress didn't shift too much either way. Now, the many investors who were keeping a close eye on the polls know what they're getting (somewhat) in terms of the federal government for the next few years, and they can start moving their money accordingly.
24/7 Wall St. has undertaken a nonpartisan examination of 21 economic sectors, the companies leading them, and the exchange-traded funds that allow investors to buy into them, with a focus on how they would have been treated under Romney or Obama.
Here's their view of what the Obama administration will mean for each of those sectors:
This is the most obvious sector that was hoping for an Obama win. Expect the Department of Energy to keep the money flowing to on alternative energy firms. First Solar (FSLR) is the biggest solar player in the United States, and its shares opened above $25 Wednesday after closing at $24.79 on Tuesday. In ETFs, there is the PowerShares WilderHill Clean Energy (PBW).
While this sector seems likely to be an obvious winner under Obama, be advised that alternative energy has been the kind of bad investment that has turned 401(k) plans into 201(k) plans: At the peak of the energy craze in 2007 to 2008, for example, First Solar was above $300.
Politics aside, this industry is going to sell more cars in the coming years. In theory, General Motors (GM) will be more protected than Ford (F), as the U.S. still has its massive stake in the company. Tesla Motors (TSLA) will shine as the model car company.
Bank regulation is higher under Obama and Dodd-Frank, but now the banks likely have this incredibly low-rate environment to deal with. The flip side is that Romney would likely have allowed the too big to fail banks to fail. Jamie Dimon of J.P. Morgan Chase & Co. (JPM) did not exactly win new friends in the election.
Big Dividend Stocks
The potential for higher corporate and capital gains taxes under Obama is said to be an issue, and many of these stocks already have pulled back. This applies to the likes of Altria (MO), utilities under the Utilities Select Sector SPDR (XLU) and others. It may even apply to the likes of an AT&T (T), although that stock is down 10% from its highs in anticipation of higher dividend taxes and as the dividend trades became too crowded in 2012.
The bond market would prefer the status quo of easy money and low rates, as we have already seen. Bond prices (lower yields) are theoretically set to remain where they are for the foreseeable future. Merrill Lynch's latest RIC report said:
"The election outcome may have important implications for Fed policy. A Romney victory could lead to a more hawkish Fed over the medium term. This would likely be good for the US dollar, but bad for gold."
Warren Buffett has been a strong supporter of Obama, and that in theory gives some protection to the interests of Berkshire Hathaway (BRK-A).
Casino owners have been very negative against President Obama after he bashed companies for expensive junkets in Las Vegas after the 2008 election. Sheldon Adelson of Las Vegas Sands (LVS) was a huge Republican supporter, and Steve Wynn of Wynn Resorts (WYNN) has been very vocal against the administration. Neither one of those bosses is happy about the outcome, but both stocks are down substantially from their 52-week highs.
Let's just say that "I like coal!" was a Romney line, while coal hasn't exactly been favored under Obama. Peabody Energy (BTU) was around $70 at the start of 2011 and is now around $29. There had been a Romney-bounce in the last month from $22, so watch for some potential pressure to remain. The ETF that has all of the major coal names is the Market Vectors Coal ETF (KOL), and at almost $26, it has been cut in half since early 2011.
Romney wanted to push defense spending higher. Obama wants to spend a bit less, although it's unclear how deep the cuts really will be, or how many jobs the will cost the industry. However, defense spending cuts are a huge portion of the coming fiscal cliff -- assuming a deal isn't reached to avert it. Interestingly, Lockheed Martin Corp. (LMT), at almost $95, is still within almost 1% of a 52-week high and carries almost a 5% dividend yield.
Gold and Silver
Gold bulls want the same Fed policy we have been seeing, as the printing of money and low interest rates help support high prices for the precious metal. Ditto for silver. Gold started to bounce handily in the past few sessions and is trading up so far on the Obama victory. Merrill Lynch noted in its RIC report: "The election outcome may have important implications for Fed policy. A Romney victory could lead to a more hawkish Fed over the medium term. This would likely be good for the US dollar, but bad for gold."
The SPDR Gold Trust (GLD) is worth a whopping $72.5 billion in market value, but the smaller ETF Physical Swiss Gold Shares (SGOL) has a lower management fee and its gold is kept in Swiss vaults. The Market Vectors Gold Miners ETF (GDX) tracks the mining sector for gold and is barely above $50, which is down about 20% from its year high of $63.05. iShares Silver Trust (SLV) is the largest silver ETF, with just over $10 billion in market value, while Silver Wheaton Corp. (SLW) is the go-to player in the Devil's Metal when it comes to silver miners.
On the surface, the housing sector would initially prefer Obama because of the Fed policies on QE3 and low interest rates. Ultimately, how that will impact real estate longer term is still being debated, but for now, that's how the pundits see it. Just keep in mind that this sector already has rallied massively, and the key ETF SPDR S&P Homebuilders (XHB), at $26.70, has a 52-week range of $14.96 to $27.06.
Will displays of wealth be shunned? That depends on whom you ask. Will higher taxes will curb spending on luxury items.Also still up in the air. The key question is whether it is really only millionaires and billionaires who will see their taxes rise, or if the tax increases fall upon those families making a mere $250,000, too. Tiffany & Co. (TIF) is perhaps the poster child of luxury spending companies, but with shares close to $65, its 52-week range is $49.72 to $78.43. Michael Kors Holdings (KORS) would fit in along the higher-end apparel and accessories theme as well, and its shares are up massively since its initial public offering.
TV, Web, papers, radio and every other form of media had more ad spending in this election that ever, which should have given a real boost to quarterly earnings. We will not identify individual companies here on either side because there are so many units and local efforts that may not be the same as the parent company might indicate.
While nuclear has never been officially killed, it has never really been embraced either. USEC (USU) has been all but left for dead.
Oil and Gas
The United States has had no real energy policy in three decades, and let's just say that the oil and gas sector was hoping for a Romney victory. Exxon Mobil (XOM) is the largest player in big oil, with a market value over $400 billion. United States Oil Fund (USO) tracks the price of oil each day, while Market Vectors Oil Services ETF (OIH) tracks the major oil and gas services companies.
REITsReal Estate Investment Trusts fall under the high-dividend classification, but the reality is that the REIT sector involves too many facets of land use to target in general. The key ETF here is the Vanguard REIT Index ETF (VNQ), but its price peaked in September around $69 and is around $65 now.
Technology should be a net neutral, minus of course whatever infrastructure spending gets cut in the coming fiscal cliff. Most investors believe that White House policies and the efforts of Congress do not (currently) target Apple (AAPL) or Microsoft (MSFT). One question up for debate: Can Obama make Research in Motion (RIMM) cool again?
Ultimately, this sector stays a neutral, post-election. The exception here is that both AT&T Inc. (T) and Verizon Communications Inc. (VZ) are the behemoths, and they are classified along with utilities under the high-dividend theme stocks. That could pose more selling if investors think that the dividend taxes really will more than double.
This sector wanted a Romney victory almost across the board, due to Obama's desire for stronger regulation of the industry, in ways that would, for example, make coal less attractive, as well as due to the expectation that an Obama win would mean higher dividend taxes coming down the pike. Utilities Select Sector SPDR (XLU) is the key ETF, but American Electric Power Co. (AEP) has been the industry champion of lobbying and has even been very vocal in dividend taxation on behalf of investors.
And Finally, the Big Kahuna ... Health care is generally too big to group under one header, and the reality is that whether or not the sector liked Obamacare, most subsectors of health care already have adjusted their business models and expectations based on the Affordable Care Act remaining the law of the land.
Health insurance: Ultimately Republican leadership was preferred by insurers, but the entire industry has already adapted in anticipation of the Obamacare rules. UnitedHealth Group Inc. (UNH) is worth more in market value than the three next large public competitors in health care insurance.
Hospitals: Higher expense coverage under Obamacare gives hospitals a victory. HCA Inc. (HCA) is one of the behemoths here.
Medical devices: Higher reimbursement rates for devices might have been seen under Romney, and Medtronic Inc. (MDT) is in that camp. But its shares are close enough to 52-week highs that this is probably up for debate.
Big pharma and biotech: Theoretically, they preferred a Romney victory, although share prices have not been at risk as much as they were ahead of the election in 2008. Stem cell companies, on the other hand, are likely happy about the outcome of the election.
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