2012 Election Winners and Losers: Coal, Dividends, Health Care, Utilities, Oil and More

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Election Day has come and gone. President Obama won a second term. The current electoral vote was by a margin of about 3 to 2 (unofficial), but the percentage last seen was only about 51% of the populous voting for Obama (also still unofficial). Many investors have keyed off of the presidential election, but the balance of power did not shift too much either way in the congressional challenges. 24/7 Wall St. has highlighted many of the sectors, and the companies or exchange-traded funds (ETFs) leading those sectors, and how they would have been treated under Romney or Obama.

We have also added caveats and color if applicable This sector and company list was put together in a nonpartisan manner.

Alternative Energy: This is the most obvious sector that was hoping for an Obama win. The implication is that the Department of Energy will keep spending on alternative energy investing. First Solar Inc. (NASDAQ: FSLR) is the biggest of the solar players in the United States, and its shares are indicated above $25 after closing at $24.79 on Tuesday. In ETFs there is the PowerShares WilderHill Clean Energy (NYSEMKT: PBW), which is now only $4.00 per share. While this sector seems an obvious winner, be advised that alternative energy has been such a bad investment that these have turned 401(k) plans into 201(k) plans. At the peak of the energy craze in 2007 to 2008, PBW was at $28 and First Solar was above $300.

Autos: Despite the debate over Romney’s GM handling or Obama being more prounion, ultimately the industry is going to try to sell more cars regardless. General Motors Co. (NYSE: GM) in theory will be more protected than Ford Motor Co. (NYSE: F), as the U.S. still has its massive stake in the company. Tesla Motors Inc. (NASDAQ: TSLA) will shine as the model car company.

Banks: Bank regulation is higher under Obama and Dodd-Frank, but now the banks likely have this incredibly low-rate environment to deal with. The flip side is that Romney would likely have allowed the too big to fail banks to fail. Jamie Dimon of J.P. Morgan Chase & Co. (NYSE: JPM) did not exactly win new friends in the election.

Big Dividend Stocks: Higher taxes under Obama are said to be an issue, but it is amazing that many of these stocks already have pulled back. This applies to the likes of Altria Group Inc. (NYSE: MO), utilities under the Utilities Select Sector SPDR (NYSEMKT: XLU) and others. It may even apply to the likes of an AT&T Inc. (NYSE: T), although the stock is down 10% from its highs in anticipation of higher dividend taxes and as the dividend trades became too crowded in 2012.

Bonds: The bond market would prefer the status quo of easy money and low rates, as we have already seen. Bond prices (lower yields) are theoretically set to remain where they are for the foreseeable future. Merrill Lynch’s latest RIC report said:

The election outcome may have important implications for Fed policy. A Romney victory could lead to a more hawkish Fed over the medium term. This would likely be good for the US dollar, but bad for gold.

Brokerage Firms: Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS) and the rest of the large investment banks will be disappointed with the election outcome. Wall St. bonus attacks are likely to remain a focus.

Buffett: Warren Buffett has been a strong supporter of Obama, and that in theory protects the interests of Berkshire Hathaway Inc. (NYSE: BRK-A).

Casinos: Casino owners have been very negative against President Obama after he bashed companies for expensive junkets in Las Vegas after the 2008 election. Sheldon Adelson of Las Vegas Sands Corp. (NYSE: LVS) was a huge Republican supporter, and Steve Wynn of Wynn Resorts Ltd. (NASDAQ: WYNN) has been very vocal against the administration. Neither one of those bosses is happy about the outcome, but both stocks are down substantially from their 52-week highs.

Coal: Let’s just say that “I like coal!” came from Romney, and coal has not exactly been very favorable under Obama. Peabody Energy Corp. (NYSE: BTU) was around $70 at the start of 2011 and is now around $29.00. There had been a Romney-bounce in the last month from $22 so watch for some potential pressure to remain. The ETF that has all of the major coal names is the Market Vectors Coal ETF (NYSEMKT: KOL), and at almost $26 this has been cut in half since early 2011.

Defense: Romney wanted to keep defense spending higher, although there has been a debate over how much the cuts really will be because of the job losses that will come from defense spending cuts. Defense cuts are a huge portion of the coming fiscal cliff. It is interesting that Lockheed Martin Corp. (NYSE: LMT), at almost $95, is still within almost 1% of a 52-week high and carries almost a 5% dividend yield.

Gold and Silver: Gold bulls want the same Fed policy we have been seeing, as the printing of money and low rates help it. Therefore, ditto for silver. Gold started to bounce handily in the past few sessions and is trading up so far on the Obama victory. Merrill Lynch noted in its RIC report:

The election outcome may have important implications for Fed policy. A Romney victory could lead to a more hawkish Fed over the medium term. This would likely be good for the US dollar, but bad for gold.

The SPDR Gold Trust (NYSEMKT: GLD) is worth a whopping $72.5 billion in market value, but the smaller ETF Physical Swiss Gold Shares (NYSEMKT: SGOL) has a lower management fee and its gold is kept in Swiss vaults. The Market Vectors Gold Miners ETF (NYSEMKT: GDX) tracks the mining sector for gold and is barely above $50, which is down about 20% from its year high of $63.05. iShares Silver Trust (NYSEMKT: SLV) is the largest silver ETF, with just over $10 billion in market value, while Silver Wheaton Corp. (NYSE: SLW) is the go-to player in the Devil’s Metal when it comes to silver miners.

Housing: On the surface, the housing sector would initially prefer Obama because of the Fed policy, QE3 and interest rates. Ultimately this is debatable, but that has been the take of market pundits. Just keep in mind that this sector already has rallied massively, and the key ETF SPDR S&P Homebuilders (NYSEMKT: XHB), at $26.70, has a 52-week range of $14.96 to $27.06.

Luxury Goods: Will display of wealth be shunned? That depends on whom you speak with, and it is still up for debate whether higher taxes will curb spending on luxury items. The question is whether it is really only millionaires and billionaires, or if the basis dips down to those families making $250K. Tiffany & Co. (NYSE: TIF) is perhaps the poster child of luxury spending companies, but with shares close to $65, its 52-week range is $49.72 to $78.43. Michael Kors Holdings Ltd. (NYSE: KORS) would fit in along the higher-end apparel and accessories theme as well, and its shares are up massively from the initial public offering.

Media: TV, Web, papers, radio and every other form of media had more media spending in this election that ever. The full tally is not yet known, but this should have given a real boost to quarterly earnings. Some outlets are conservative and some are liberal. We will not identify individual companies here on either side because there are so many units and local efforts that may not be the same as the parent company might indicate.

Nuclear: While nuclear has never been officially killed, it has never really been embraced either. USEC Inc. (NYSE: USU) has been all but left for dead.

Oil and Gas: The United States has had no real energy policy in three decades, and let’s just say that the oil and gas sector was hoping for a Romney victory. Exxon Mobil Corp. (NYSE: XOM) is the largest of big oil, with a $400+ billion market value. United States Oil Fund (NYSEMKT: USO) tracks the price of oil each day, while Market Vectors Oil Services ETF (NYSEMKT: OIH) tracks the major oil and gas services companies.

REITs: Real Estate Investment Trusts fall under the high dividend classification, but the reality is that the REIT sector involves too many facets of land use to target in general. The key ETF here is the Vanguard REIT Index ETF (NYSEMKT: VNQ), but its price peaked in September around $69 and is around $65 now.

Technology: Outside of the government spending plans, technology is probably a net neutral. Most investors believe that White House policies and the efforts of Congress do not (currently) target Apple Inc. (NASDAQ: AAPL) or Microsoft Corp. (NASDAQ: MSFT). Technology should be a net neutral, minus of course whatever infrastructure spending gets cut in the coming fiscal cliff. One question up for debate, which has not gone its way yet: Can Obama make Research in Motion Ltd. (NASDAQ: RIMM) cool again?

Telecom: Ultimately, this sector is a neutral, based on the election outcome. The exception here is that both AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) are the behemoths, and they are classified along with utilities under the high-dividend theme stocks. That could pose more selling if investors think that the dividend taxes will really more than double.

Utilities: This sector wanted a Romney victory almost across the board. This was due to regulation, what source of energy can be used (coal versus other) and due to perceived higher dividend taxes coming down the pipe. Utilities Select Sector SPDR (NYSEMKT: XLU) is the key ETF, but American Electric Power Co. Inc. (NYSE: AEP) has been the industry champion of lobbying and has even been very vocal in dividend taxation on behalf of investors.

And finally the big kahuna … Health care is generally too big to group under one header, and the reality is that whether or notthe sector liked Obamacare, most subsectors of health care already have moved their business models and expectations based on Obamacare remaining.

  • Health insurance: Ultimately Republican leadership was preferred, but the entire industry has now consolidated in anticipation of the Obamacare rules, and the industry had moved to adapt to changes in the health care system starting in 2014. UnitedHealth Group Inc. (NYSE: UNH) is worth more in market value than the three next large public competitors in health care insurance.
  • Hospitals: Higher expense coverage under Obamacare gives hospitals a victory. HCA Inc. (NYSE: HCA) is one of the behemoths here.
  • Medical devices: Higher reimbursement rates possibly would have been seen under Romney, and Medtronic Inc. (NYSE: MDT) is in that camp. But its shares are close enough to 52-week highs that this is probably up for debate.
  • Big pharma and biotech: Theoretically they preferred a Romney victory, although share prices have not been at risk as much as they were ahead of the election in 2008. Stem cell companies, on the other hand, are likely happy about the outcome of the election.

Also, the small public sector of retail gun selling should benefit as well but this is a very small segment in the grand scheme of the economy.

JON C. OGG

Follow on Twitter @jonogg

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