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Stocks that swing with Bush or Kerry
The stock market is a good forecaster, and stocks that would benefit under Bush are rising. But it's worth watching a portfolio of Kerry stocks, too.
By Jon D. Markman
Have you ever noticed how geopolitical events that seemed extremely important at one time, causing major market moves, just fade away after awhile?
Just two years ago, it seemed that Pakistan and India were on the verge of nuclear war. Since then, nada. How about El Salvador and Nicaragua, subject of so much angst during the Reagan era? No news for years. And more recently, how about the danger of China, the whole outsourcing debate and the devaluation of the yuan? Yawwn. Thats so last year.
Whether we are hard-wired to forget unpleasantness or simply have national ADHD, amnesia is a permanent psychological part of the economic, political and investment landscape. And so if there were two concepts that seem destined to wind up on the scrap heap of contemporary history in relatively short order, they might be Iraq and the high price of oil.
Both theoretically work against President Bush in his campaign for the presidency, but they are on the verge of becoming non-events that affect neither stocks nor the election in ways that most observers currently believe likely. The longer the GOP bogs down Democratic candidate John Kerry into a time-consuming debate about his Vietnam medals, eclipsing a weak economy and a mismanaged Iraq war effort in headlines, the more likely Bush will be awarded four more years.
A big wind blows
Already it appears that the stock market, one of the most successful forecasting tools on the planet, has begun betting on a second Bush presidency, as the sorts of stocks that should prosper in his administration have begun to surge in recent weeks along with his poll numbers. The mid-August turnaround in the market seems to have coincided neatly with the turnaround in Bushs reelection chances and with Hurricane Charley. Its as if a big wind blew away voters' and investors memories of promises unmet, from job growth to the capture of Osama bin Laden, and reset the chessboard for a new game.
If Wall Street is indeed ready to forgive and forget on issues ranging from drug reform to the budget deficit, how will we see it in the stock market? Or conversely, how will we see in equities that Kerry is gaining? By observing the names that are bid up and those tapering off.
Lets take a speculative look at 20 Bush-bet stocks and how they stack up versus 20 Kerry crusaders.
Team Bush
The best bets in favor of Bush are, duh, ones in favor of dividend-paying stocks, energy and basic materials.
The reason for the first group is tax policy: The elimination of so-called double taxation of dividends pushed by the Bush administration would likely be one of the first fiscal policy initiatives reversed by a new Kerry administration. If investors thought that dividend-paying companies were about to have their big tax benefit kicked away, they would start selling them now. Instead, dividend payers have been on a tear. Here are 10 dividend payers highly rated by the MSN StockScouter system to watch over the next two months. (Ive included REITs, even though they dont get the favorable tax treatment, because I believe they will continue to do well under a Bush second term.)
| 10 high-dividend payers | | Company | Market cap | Dividend yield | StockScouter rating | Aug. 27 close | | IMPAC Mortgage Holdings (IMH, news, msgs) | $1.5 billion | 11.9% | 10 | $25.23 | | American Capital Strategies (ACAS, news, msgs) | $2.5 billion | 9.1 | 10 | $31.78 | | American Home Mortgage Investment (AHM, news, msgs) | $1.1 billion | 8.9 | 10 | $27.42 | | RAIT Investment Trust (RAS, news, msgs) | $671 million | 8.9 | 10 | $26.92 | | Cornerstone Realty Income Trust (TCR, news, msgs) | $523 million | 8.5 | 10 | $9.38 | | New Plan Excel Realty Trust (NXL, news, msgs) | $2.5 billion | 6.5 | 10 | $25.44 | | Pennsylvania R.E.I.T. (PEI, news, msgs) | $1.4 billion | 5.6 | 10 | $38.43 | | CBL & Associates Properties (CBL, news, msgs) | $1.8 billion | 4.8 | 10 | $60.55 | | The Mills Corp. (MLS, news, msgs) | $2.7 billion | 4.7 | 10 | $50.28 | | Redwood Trust (RWT, news, msgs) | $1.2 billion | 4.5 | 10 | $59.52 | | The Macerich Co. (MAC, news, msgs) | $3.2 billion | 4.5 | 10 | $54.11 |
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Energy is an obvious Bush choice, since he is the prince of the oil patch and drillers would continue to have an operational field day in a second Bush administration. But basic materials, such as chemical manufacturers and forest products companies, should also see their fortunes improve as environmental regulations are recklessly loosened, lowering the cost of doing business. They may also finally see asbestos liabilities cleared away in a more sympathetic, devil-may-care second term. Ive covered energy stocks to death; here are top candidates in chemicals and forest products.
| Chemical and forest products winners if Bush wins | | Company | Industry | Market cap | % chg last 20 days | StockScouter rating | Aug. 27 close | | Valhi (VHI, news, msgs) | Specialty chemicals | $1.7 billion | 26.3% | 10 | $14.56 | | Hercules (HPC, news, msgs) | Synthetics | $1.5 billion | 17.3 | 10 | $13.85 | | Potlatch (PCH, news, msgs) | Paper products | $1.3 billion | 10.2 | 10 | $44.16 | | NL Industries (NL, news, msgs) | Synthetics | $686 million | 8.7 | 10 | $14.19 | | Florida Rock Industries (FRK, news, msgs) | Cement | $2.0 billion | 8.0 | 10 | $46.37 | | Mueller Industries (MLI, news, msgs) | Metal fabrication | $1.3 billion | 3.4 | 10 | $39.43 | | IPSCO (IPS, news, msgs) | Steel & iron | $1.1 billion | 3.1 | 10 | $24.14 | | Ispat International (IST, news, msgs) | Steel & iron | $3.0 billion | 44.7 | 9 | $25.40 | | The St. Joe Co. (JOE, news, msgs) | Real estate | $3.6 billion | 12.3 | 9 | $48.33 | | Masisa S.A. (MYS, news, msgs) | Lumber, wood | $495 million | 12.3 | 9 | $1.006 |
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Team Kerry
Its pretty hard to pinpoint stock groups that would prosper under Kerry, but we can guess that if the effete, elite champion of the downtrodden fulfilled his promise to create more jobs, the money would filter down to the recently trashed small discount retail chains. Also, on the other side of his psycho-social spectrum, well give him the latte and white-wine stocks, as well as ones representing his major backers in Hollywood and the big media. Plus you've got to give him at least one French stock.
He also gets Anheuser-Busch (BUD, news, msgs) because I noticed on a campaign contribution report that one of its top executives was a leading donor to the Kerry campaign.
| Kerry crusaders | | Company | Industry | % chg YTD | StockScouter rating | Aug. 27 close | | Starbucks (SBUX, news, msgs) | Specialty eateries | 28.4% | 9 | $42.57 | | Four Seasons Hotel (FS, news, msgs) | Lodging | 12.5 | 9 | $57.56 | | Time Warner (TWX, news, msgs) | Entertainment - diversified | -7.1 | 9 | $16.71 | | The Robert Mondavi Corp. (MOND, news, msgs) | Beverages - wineries | 6.7 | 8 | $41.43 | | TJX Companies (TJX, news, msgs) | Discount stores | -4.2 | 8 | $21.12 | | Big Lots (BLI, news, msgs) | Discount stores | -13.5 | 8 | $12.29 | | Peet's Coffee & Tea (PEET, news, msgs) | Processed & packaged goods | 31 | 7 | $22.87 | | Constellation Brands (STZ, news, msgs) | Beverages - wineries | 12.2 | 7 | $36.95 | | Anheuser-Busch (BUD, news, msgs) | Beverages - brewers | -0.4 | 7 | $52.47 | | New York Times Co. (NYT, news, msgs) | Publishing - newspapers | -14.2 | 6 | $40.98 | | France Telecom (FTE, news, msgs) | Telecom services - foreign | -14.6 | 6 | $24.41 | | Knight-Ridder (KRI, news, msgs) | Publishing - newspapers | -16.6 | 6 | $64.50 | | Family Dollar Stores (FDO, news, msgs) | Discount stores | -25.8 | 6 | $26.63 | | Chalone Wine Group (CHLN, news, msgs) | Beverages - wineries | 19.7 | 5 | $10.53 | | Dollar General (DG, news, msgs) | Discount stores | -7.5 | 4 | $19.42 | | Dollar Tree Stores (DLTR, news, msgs) | Discount stores | -20.2 | 4 | $24.01 | | Fred's (FRED, news, msgs) | Discount stores | -53.3 | 4 | $14.48 | | Goody's Family Clothing (GDYS, news, msgs) | Apparel stores | -18.1 | 2 | $7.64 | | 99 Cents Only Stores (NDN, news, msgs) | Discount stores | -52.3 | 2 | $13.00 | | Viacom Cl A (VIA, news, msgs) | Entertainment - diversified | -21.5 | N.A. | $34.75 |
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Of all these, the most attractive long-term ideas are the discount variety stores like Family Dollar (FDO, news, msgs) and Dollar Tree (DLTR, news, msgs), as they're currently most unloved and disrespected. Ill watch them all over the next two months and report back in the Fine Print sections of future columns.
If youd like to offer your views of which stocks to track for Bush and Kerry, write me by clicking here and put the word campaign in the subject field.
Fine print
Many readers wrote in with responses to my call for stocks that should participate in the cleanup of Hurricane Charley in Florida. Probably the most cited name was Rinker Group (RIN, news, msgs), an Australia-based cement producer with a large operational base in southern Florida. Several also suggested Simpson Manufacturing (SSD, news, msgs), which makes galvanized steel connectors that add a lot of strength to wood-frame construction. John Goodrich wrote: I would anticipate that one of the effects of the devastation in Florida would be more stringent building codes requiring stronger, more hurricane-resistant building methods. You can see a wide selection of various configurations of these ingenious products in any Home Depot (HD, news, msgs) store. Bob Busler, of Punta Gorda, Fla., disagreed with my choice of Florida Rock (FRK, news, msgs), stating that the hurricane damage to the cement part of structures was limited. He added: My best pick of investments from the hurricane is Briggs and Stratton (BGG, news, msgs). It took days to finally get an electric generator with everyone in Charlotte County trying to get one. Now people are looking for power washers. Both the generators and power washer engines are made by BGG. This is a small company that is going to have a strong quarter from the results of this storm. Hughes Supply (HUG, news, msgs) is another company that should do extremely well."
Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line.
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