Table of Contents - Zacks Investment Research
Table of Contents
1) The Economy ............................................................................................... pg 2
2) Healthcare ................................................................................................... pg 4
3) Energy ......................................................................................................... pg 5
4) The Fiscal Cliff and Defense ........................................................................ pg 6
5) Wall Street ................................................................................................... pg 7
Other Resources .............................................................................................. pg 9
5 STOCKS TO OWN...
1
5 Stocks to Own
... If Obama Wins
... If Romney Wins
by Kevin Cook
The 2012 presidential election is shaping up to be an exciting battle between two
candidates with strong national followings. The incumbent and the challenger both
have compelling platforms, and future directions for the country and the economy
hinge on who we choose as citizens and voters.
But as investors, we have to be prepared for either outcome, attached to neither
possible victor and ready to simply follow the net money flow. So, it¡¯s a good time
to look at the investing landscape and how it might change before and after our
next leader takes the oath in January.
To begin gaming the election and trying to estimate likely investment beneficiaries
of each candidate, we¡¯ll first look at five big election issues and the sectors they
impact. Then we can pick some stocks that could win for a second-term 44, and
some that could win for a new 45.
1) The Economy
Job creation and taxes. These are the two biggies that most ¡°presidential¡± economic
debates revolve around. Whether any leader can actually get anything done in
Washington to spur job growth might be the biggest debate. Romney¡¯s classic
Republican bid to cut taxes will surely meet resistance in a Congress with its back
against the wall on deficits and spending cuts. And Obama¡¯s infrastructure and
agriculture bills face the same wall.
But assuming either one could be somewhat successful, here are a few ideas to
consider:
5 STOCKS TO OWN...
2
Federal Reserve economic projections from June that drive
monetary policy. Update due at the September FOMC meeting.
Figure 1. Central tendencies and ranges of economic projections, 2012¨C14 and over the longer run
Percent
Change in real GDP
5
Central tendency of projections
Range of projections
4
3
2
1
+
0
1
Actual
2
3
2007
2008
2009
2010
2011
2012
2013
2014
Longer
run
Percent
Unemployment rate
10
9
8
7
6
5
2007
2008
2009
2010
2011
2012
2013
2014
Longer
run
Percent
PCE inflation
5
4
3
2
1
+
0
-
2007
2008
2009
2010
2011
2012
2013
2014
Longer
run
Note: De?nitions of variables are in the notes to the projections table. The data for the actual values of the
variables are annual.
Obama victory: The President¡¯s 2013 budget includes a historic six-year $476
billion plan for transportation infrastructure projects, including high-speed rail
initiatives. Large engineering and construction companies like Jacobs Engineering
(JEC) may thrive.
Romney victory: Tax cuts mean more capital investment by corporations and
more spending by consumers. Buy IBM for enterprise IT, or an early-growth retailer
like Michael Kors (KORS).
5 STOCKS TO OWN...
3
2) Healthcare
As we¡¯ve seen, ¡°Obamacare¡± is good for health care providers, like hospitals and
some HMOs, because it encourages patient care for more than 30 million uninsured
Americans. The recent Supreme Court ruling upholding the Patient Protection and
Affordable Care Act will only ensure that more patients are added to Medicaid,
which protects the poor. And the waves of baby boomers retiring over the next few
years will boost demand for Medicare.
The insurers have been under pressure as they see their costs rising. But, the
recent flurry of M&A in the group was a scramble to get more exposure to Medicaid
and Medicare payments, with Aetna (AET) buying Coventry Health Care (CVH)
and WellPoint acquiring Amerigroup (AGP).
Meanwhile, Romney may ease pressure on pharmaceutical companies and device
makers, like Stryker (SYK), two businesses that are due to suffer from Obamacare.
The President¡¯s plan imposes a 2.3% excise tax on the sale of medical devices
starting next year and charges drug makers $85 billion in fees over the next 10.
5 STOCKS TO OWN...
4
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