Politics and Investing: 2012 Presidential Race
Kevin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Some quick facts/stats are in order to begin. Less than 10% of Americans ever make a political campaign donation. It is a given to the wise investor that campaign donations pay off in the long run for donors, meaning that campaign donations can be an indicator for future company performance and thus stock performance. It is surprising that more investors don’t put the American Business and Politics collusion to use for investment strategies.
Since this is a Presidential election year it seems prudent to look at the current donation situation for Romney and Obama to see how the election will affect certain stocks. There are no guarantees in life, but campaign donations almost always lead to some positive action for the donors. With this basic notion in mind and since the Presidential campaign is the biggest prize for donors it stands to reason that political donation trends are a form of investing trends.
In the 2008 election Obama’s top donor was good ole’ Golden (yes, we’re building a bubble) Sachs. Goldman Sachs (NYSE: GS) also has ex-employees occupying the vast majority of financial positions in the US Government. Don’t ever bet against Goldman unless Goldman bets against Goldman’s holdings (see: Bubble, Housing). Speaking of holdings, anything Goldman touches should make money so check out their family of mutual funds and keep a vigilant watch for bubble inflation courtesy of Goldman.
Other banking entities were supporting Obama up through about March of 2012. But Obama decided to harness populist feelings by attacking the banks and being “unfriendly” with regulation. Individuals in the financial sector are saying that ‘The president has been too tough on us, both in policy and on rhetoric.’ The predictable result? Romney’s top six donors are banks (amounting to more than $2 billion thus far) and the banking donations have dried up for Obama. The obvious read here (I’ll still say it) is that an Obama victory means further valuation destruction for bank stocks and maybe a few less bubbles to ride. Cheap bank stocks like JPMorgan Chase (NYSE: JPM) or Wells Fargo (NYSE: WFC) could see a turnaround if Romney is elected.
Now that Obama is using populist disgust and/or hatred or the banking industry, his top donors have become a diverse group. The group supporting the President includes Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG) along with some universities: University of Chicago, University of California, Harvard and Columbia. Comcast and Time Warner are communications giants on the list, as is high-powered global law firm Dla Piper.
This gives the investor some interesting avenues of research when looking for less obvious investments. If a company’s stock takes a hit because of a lawsuit or is somehow dependent on a victory in court, they could be a good buy if they’re being represented by Dla Piper. Any information on a Dla Piper client list could end up becoming a ‘who’s who’ of investing opportunities.
It would also be reasonable to expect things to go well for alumni and officers of the aforementioned Universities. I realize this is a bit of a stretch, but if political help would ever improve things for a research project or school related entity, remember who has the President’s ear.
An interesting entity on the Obama list is the privately held company Kaiser Permanente. It is the largest managed care organization in the United States with 8.9 million health plan members, 167,300 employees, 14,600 physicians, 37 medical centers, and 611 medical offices. It is a non-profit and thus won't be publicly traded anytime soon but partners, insurers and products preferred by Kaiser are all investment opportunities I will explore in future articles.
If things start to look obvious in the Presidential election, then things may be looking obvious for some investment trends. Invest wisely, invest boldly and make money--capitalism wants you to.
thedeswolf has no positions in the stocks mentioned above. The Motley Fool owns shares of Google, JPMorgan Chase & Co., Microsoft, and Wells Fargo & Company and has the following options: short OCT 2012 $33.00 puts on Wells Fargo & Company and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Goldman Sachs Group, Google, and Wells Fargo & Company. 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.