The Election is Over: Now What?

Callum is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Election 2012

The day of the election the stock market went up, and investors were excited about what that night would bring. After the election, investors must have been disappointed because the market was down 2.5%. Not a vote of confidence for the second term president, but one could say that other factors, such as Europe saying its economy won't grow in 2013, could be adding to the downward pressure. But what does an Obama presidency, now that we know he won, mean for your investments?

Hospitals 

A while ago I said hospital stocks would be a great buy if you thought Obama was going to win. And guess what--I was right. HCA Holdings (NYSE: HCA) is up almost 10% on Nov. 7. Why is it up? Because hospitals are required to take in patients if they need intensive care (such as if your arm is gone and you are bleeding out at their door), even if they don't have health insurance, which means hospitals would have to eat those losses. With Obamacare looking like it will stand as is (at least for now), more people will have health insurance, which means those patients which would have cost hospitals money are now going to make money for the hospitals. This means better profit margins and higher profits. I would definitely recommend buying up hospital stocks right now.

Defense 

That same article that said hospitals would be a good buy if Obama won stated that if he was reelected, defense contractors would take a hit. It is way to early too see how the fiscal cliff will affect them, but after the election Lockheed Martin (NYSE: LMT) fell from $95 a share to $90 on worries that the fiscal cliff would eat into their earnings. I agree that there's no way America can keep spending over $700 billion on defense spending each year, which is why I would stay away from defense-related companies for now, until after the fiscal cliff has been resolved.

The one exception to this rule is Boeing (NYSE: BA), whose civilian aircraft sales continue to boom upwards. Growth continues to be very strong, and management expects the total amount of planes in use to grow from 19,890 in 2011 to 39,780 by 2031. This means that Boeing will have to make a lot more planes to meet the growing demand. They also see air cargo traffic growing over the next two decades by 5.2% annually, which is better than the 2.4% contraction in 2011.

Shipping companies will need to upgrade and buy more fuel-efficient planes, which Boeing can manufacture. Strong growth from Asia, the Middle East, and Latin America will push air traffic higher, requiring more passenger planes. Boeing is a well-diversified company (with both civilian and government contracts) and is the best way to buy into the fear of the fiscal cliff while still having a long growth runway and a lot of future catalysts to push the stock up. Plus, there's a 2.4% dividend yield that will reward patient investors.

<img src="/media/images/user_13409/cmo_forecast_indicators_chart1_sml_large.gif" />
 

Boeing's Forecasts for the next 2 decades

Final Thoughts 

With the upcoming fiscal cliff and Congress the same as it was before the election, there are a lot of headwinds in the near future. Only time will tell how this plays out, but hospital stocks will continue to benefit from more people having health insurance, and defense contractors will have no choice but to deal with budget cuts (that could be worth over $100 billion a year). The fiscal cliff is now the next big thing to pay attention to, and stocks will move according to how investors see the cliff getting resolved. Hospital stocks will continue to do very well under Obama, and Boeing is a great way to ride out the fiscal cliff.


callumturcan has no positions in the stocks mentioned above. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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