What can investors expect during Barack Obama’s second term? When the president gave his victory speech on Tuesday night, he provided some broad outlines of where he plans to take the country over the coming four years.
Of course, he will still have to compromise with a Republican-controlled House of Representatives, and he continues to face severe budgetary constraints, as well as the need to deal with the looming “fiscal cliff.” But Obama still wields tremendous influence over the country’s direction, and now that he no longer needs to worry about re-election, he will have a freer hand to push his agenda forward.
Here’s a look at what some analysts are saying about the election result, including which investments stand to gain over the next four years—and which ones could face challenges.
Renewable Power Renaissance?
“We want our children to live in a country … that isn’t threatened by the destructive power of a warming planet,” Obama said in his victory speech.
In the president’s first term, he supported increased funding for green energy companies, as well as tax credits to further clean-power development. Obama supports incentives like the wind energy production tax credit, for example. But that tax credit could expire on December 31 unless he can strike an agreement with Congress to extend it.
Regardless, Obama is likely to keep encouraging green energy initiatives over the next four years. According to Zacks.com’s Neena Mishra, a good way to profit is to buy units of the PowerShares CleanTech Portfolio ETF (AMEX: PZD). The fund is based on the Cleantech Index, which is designed to track leading green technology companies across a number of industries. Top holdings include Schneider Electric (3.28%), Siemens (3.17%), Trimble Navigation (3.16%) and Johnson Controls (3.08%). The CleanTech Portfolio ETF’s MER is 0.74%, and it yields 1.65%.
Obamacare on the Way
If he had been elected, Mitt Romney pledged to repeal the Patient Protection and Affordable Care Act, nicknamed Obamacare, the president’s signature health care law. But with the Democrat’s return to the White House, the new system is now certain to come into full effect in 2014, as scheduled.
The new law requires all Americans to carry health insurance, something that many analysts feel will be a boon to insurance companies. But Investing Daily’s Jim Fink doesn’t share that view. In an article published after the Supreme Court upheld Obamacare in June, Fink wrote that the increased premium revenues will be more than offset by new regulations that the law imposes on insurance providers.
Instead, Fink recommends taking a look at companies that are already focused on government programs like Medicare and Medicaid. “The big winners of Obamacare are those health care companies that already act like Medicaid vassals of the government,” wrote Fink. He points to the following three stocks as examples:
All three gained in the wake of Obama’s re-election: Wellcare closed 4.35% higher yesterday; Centene jumped over 10%, and Molina rose 4.6%.
Broadband Expansion Will Continue
Obama also highlighted the tech sector in his victory speech: “We want our kids to grow up in a country … that lives up to its legacy as the global leader in technology and discovery and innovation …” he said.
In his first term, Obama initiated the National Broadband Plan, which aims to make high-speed Internet access available to 90% of the country by 2020. In addition, he signed an executive order in June to make it easier for broadband providers to expand their networks on federal lands. Under the current system, different government agencies approve new broadband projects depending on their own set of criteria. The order seeks to streamline this process by mandating a common set of principles.
Zacks.com’s Mishra sees the VOX Telecom ETF (AMEX: VOX) as a good way to profit from rising high-speed Internet use, but you could just as easily invest in shares of the country’s major providers. AT&T (NYSE: T), for example, continues to expand its U-Verse TV and high-speed Internet service. In the latest quarter, AT&T added 613,000 high-speed Internet users, to bring its total to 7.1 million. The stock also pays a high 5.19% yield, compared to the Vox Telecom ETF’s 2.85%.
Some Analysts See Trouble Ahead for Defense Stocks
The president highlighted the need for a strong military in his victory speech, though he also pointed out that “a decade of war is ending.” Defense spending also faces the possibility of significant cuts in the coming year.
“Looks like the president will be re-elected,” Jeffrey Sica, of Sica Wealth Management, told TheStreet.com on election night “One industry that will likely experience reduced government largesse in the future is defense. Defense stocks, with their low p/e ratios and high dividend yields, may look like value opportunities to some. To us, given budgetary realities, they sure have many of the attributes of value traps.”
Analysts at Sterne Agee also said they expect the defense budget to “remain on a path downward.” In a note to clients, analysts Peter Arment and Josh Sullivan wrote: “We expect a pullback in defense stocks over the coming days, especially with average year-to-date gains of 16%.”
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