Who Wins with Which President
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I promise no political ideologies, just some speculation on what stocks to buy with one month left before the election.
If Romney Wins
A big surprise is that some of the traditional “sin” stocks could fare very well under Romney. The biggest name would be Las Vegas Sands ). It’s no secret that CEO Sheldon Adelson has donated $70 million to the Republican campaign with a promise for $30 million more if that’s what it takes, he has said.
What does he want in return? One thing is support against the union card-check proposal that helps workers organize as Adelson’s is the only casino on the Vegas strip that is not unionized.
Republicans would likely enable favorable tax treatment for that 90% of Las Vegas Sands revenue that comes from Macau and Singapore.
Some pundits have theorized that a Romney win might get Adelson a little slack on that federal investigation against Las Vegas Sands into violations of the Foreign Corrupt Practices Act. Competitor Wynn is also under the same FCPA microscope. Even with a full Republican House, Senate and presidency, it’s not likely to sway a federal investigation already in progress.
Adelson has a personal grudge against Obama for his remarks three weeks into his term when he said bailed out bankers shouldn’t take trips to Las Vegas on the taxpayers’ dime. The remark caused an almost immediate drop in Vegas bookings, which Adelson still hasn’t forgiven.
Capital gains tax rate cuts, cuts on top tax rates, foreign profit tax exemption, and an elimination of the estate tax would personally benefit Adelson (and Las Vegas Sands to some extent) for anywhere from a 1,000-2,000% gain on his donations.
Regardless of who wins, Macau and Singapore have been the hypergrowth drivers for casinos with a presence there. Surprisingly, Vegas itself has seen a pickup recently as well.
Other Romney winners would be oil and gas stocks and financials. But a long-time name associated with Bain, Bain Capital, and Romney himself is Monsanto (NYSE: MON). Fresh out of Harvard, new Bain employee Romney helped steer the company away from its public relations nightmare of a chemicals company and take a giant leap into the unknown by becoming the agriculture biotech giant it is today. When Romney first got involved in the 1970s Monsanto was getting heat for DDT, agent Orange, and PCBs. Monsanto was so grateful it provided “seed money” for the spinoff of Bain Capital from Bain.
Monsanto now operates in two segments: Seeds and Genomics and the Agricultural Productivity division. With a 22.59 P/E and a 1.60% yield it trades at a premium to peers like DuPont but just this week Susquehanna raised its price target for Monsanto to $115.
After five quarters of 20% or more EPS growth Monsanto guided for 15% EPS growth for 2013 at its latest Q3 earnings release in June. Q4 results reported on October 3 showed a miss mainly due to drought stricken farmers buying less seed and herbicide but the company maintained 2013 guidance for EPS growth at that mid- teens number .
Even if Romney wins, risks include increasing pushback against GMOs (genetically modified organisms, which comprise most of Monsanto’s seeds) such as California’s GMO labeling initiative Proposition 37 on the ballot this November and GMO labeling already in effect in 50 countries are heating things up again for Monsanto. Monsanto and DuPont as well as supermarket chains are spending millions to oppose the initiative in anticipation that its passing would spread like a California wildfire to even more states. Several countries have already banned or are considering banning Monsanto's GMO 810 maize, including Poland, Hungary, France and Peru. There is also controversy over its Roundup herbicide which is believed to engender "superweeds" resistant to glyphosate, an active ingredient in Roundup. Having a friend in The White House may not be enough to deflect a 1970's like groundswell against the company's products.
If Obama Wins
Sectors that expect to benefit from an Obama re-election are housing, alternative energy, health care and technology.
A health care name that should benefit from the Patient Protection and Affordable Care Act is CVS Caremark ). CVS just hit a 52-week high on Oct. 2 and has been profiting this year from competitor Walgreen’s problems with Express Scripts ). At a September 12 Morgan Stanley Global Healthcare Conference CEO Larry Merlo was asked about the retention rate for those former Walgreen's customers and he said that 55% had already enrolled in the CVS auto refill program and 83% had enrolled in the CVS Extra Care loyalty program. He also said by the end of the year there should be more clarity as to exactly how many customers defecting from Walgreen's would stay with CVS as their primary pharmacy now that Walgreen's had resolved their reimbursement dispute with Express Scripts. Its P/E is 17.32 with a 1.30% yield. CVS reports again on November 6. Walgreen's itself may see a boost under an Obama win as the rising tide lifts this boat as it is instituting a loyalty program of its own.
Some alternative energy names will benefit but do I mean First Solar? I most emphatically do not, but biomass, some wind, and nuclear names should prosper. Exelon ), a utility generating electricity from fossil, hydro, natural gas, renewable, and nuclear (20% of nuclear for the US), has a 5.90% yield and a 15.12 P/E. As the risk on trade has lifted the market, defensive utilities have declined. Exelon is down more than 20% from its 52-week high. It operates mainly in central Maryland, Southeast Pennsylvania and northern Illinois. Maybe you don’t give credence to the Old Farmer’s Almanac but these areas are expected to endure a colder winter and hotter summer in 2013 and raise profits for Exelon.
Scientific research names could suffer under a Romney win with an expected 5% or more decrease to funding for the National Institutes of Health. But under an Obama administration two gene-sequencing companies, Life Technologies (NASDAQ: LIFE) and its competitor, Illumina ), would have an all clear. Illumina is dependent on government support for 70% of its research revenues. Illumina is in the midst of an on-again, off-again takeover bid by Roche Holdings and may even agree to be acquired before the election but they've made it clear that $51 a share won't get it done. Illumina has an 83.22 P/E and this back and forth with Roche has helped double the share price in 52 weeks but this sector of genetic testing is the fastest growing segment of the diagnostics market especially in oncology. Life Technologies is not seeking to be acquired either and both have been making acquisitions of their own. Life Technologies has stated in the past they are seeking more strategic partnerships with Big Pharma like the ones in place with Glaxo Smith Kline and Bristol Myers. Life Technologies’ P/E is 20.33. Some investment firms like Orbimed Advisors LLC of New York have been buying both names.
By the end of Wednesday’s presidential election debate, there should be even more clarity and these names should start seriously moving. Whoever you root for, you should leave your political preferences aside and buy what will work for your portfolio. Most importantly, go out and vote.
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