A new presidential term typically stirs concern about what it will mean for the stock market, and the outcome of the recent election is no exception. Naturally, the general impact of President Obama's re-election is already priced into the market.
Yet investors can still survey the political landscape and position for better returns for the long term by identifying industries that are likely to do better under four more years of President Obama and those that aren't. This means increasing your holdings in the former and decreasing holdings in the latter if the fundamentals of specific companies warrant it.
On a level playing field, where competitors in an industry have the same presidential advantages or disadvantages, it takes astute management to remain competitive. So, although some industries may get a White House market boost, this by no means assures any given company's success.
Generally, though, you might consider increasing your portfolio's weighting in such companies — your holdings in them compared with stocks in other industries—if, after you do your homework, you find that the company's fundamentals justify this.
Here are some of the industries expected to benefit from Obama's second term:
Now that Obama has been re-elected and Democrats have increased their majority in the Senate, the survival of Obama's Affordable Care Act is assured. Because of this act, health insurance coverage will increase by about 30 million people over the next decade. States will take a larger role in Medicaid, and there will be private health insurance exchanges where people can buy policies.
Though one of the goals of the legislation was to increase regulation of health insurers, it nevertheless benefits some companies by requiring that people have insurance. Yet major health insurance companies are facing limits on company profits and must deal with mandates on coverage, so the impact of Obamacare's survival will be mixed bag.
Companies that stand to benefit the most are insurers that provide managed-care services through government-subsidized programs, including Medicaid. Companies in this category include Centene and Molina Healthcare.
The larger health insurers like UnitedHealth Group, Aetna, and Wellpoint will likely face tougher rules on how they can do business, which could hurt profits.
Because more people will be insured, hospitals will have more patients whose bills will be paid, increasing their revenues and potential profits. Hospital companies that may benefit include HCA Holdings, Universal Hospital Services, Tenet Healthcare and Vanguard Health Systems.
Obama's strong backing of energy alternatives to oil and coal and his emphasis on environmental protection augur well for wind, solar, natural gas and electric cars. In his State of the Union address in January the president proposed several federal initiatives favoring the use of natural gas for transportation.
Companies that stand to benefit from these initiatives include Clean Energy and Westport Innovations.
Twenty-two states are looking to purchase natural-gas-powered powered vehicles for their government fleets. In addition, Obama has said he would like the nation to have one million plug-in hybrid cars on the road by 2015. Tesla Motors, a manufacturer of all-electric cars, has received a $465 million loan from the Department of Energy, and their Model S has been named Car of the Year for 2013 by Motor Trend magazine.
Also, Obama is keen on solar and wind technology, but will need Congressional support if he is to succeed in extending tax breaks to those industries.
With Obama's re-election comes the prospect of continued service by Ben Bernanke as chairman of the Federal Reserve, who likes to keep interest rates low. This tends to keep the value of the dollar low, which usually sustains or increases the price of gold.
Companies in industries that likely would have done better under a Romney administration can still do quite well under Obama, so don't throw the baby out with the bathwater by dumping all or most of your shares of these companies. Instead, you might consider decreasing their weighting in your portfolio if you believe that the second Obama administration may impair their growth or hamstring their ability to compete.
Such industries include:
|Oil and coal|
Obama's victory increases the likelihood that congressional Democrats looking for new revenue may revisit their goal of eliminating long-standing tax benefits for oil companies. In March, Republicans blocked Obama's efforts to end tax breaks for big oil companies. And Romney's defeat means that the coal industry probably won't get any government boosts in the next four years.
Obama has waged a war on coal through his focus on stricter regulation of greenhouse gas emissions by the Environmental Protection Agency, so coal companies including Arch Coal, Walter Energy and Peabody Energy may face pressure as the administration continues to focus on clean energy.
Romney, who pledged to seek the repeal of the Dodd-Frank Wall Street Reform Act, campaigned on the need for looser regulation while Obama advocated the opposite. Look for stricter financial regulation — if the Democrats can get it through the House of Representatives. Companies affected would include J.P. Morgan, Wells Fargo and Citigroup.
Yet, the stock market did quite well during Obama's first term. If high trading volumes continue, such big brokerage houses could register significant revenues despite the costs of complying with any new regulations.
For-profit educators are generally perceived as possible losers regarding Obama's re-election, as investors fear that Obama will seek more regulation of an industry that is already struggling. In addition, it seems likely that Sen. Tom Harkin of Iowa, an outspoken critic of the industry, will retain his chairmanship of the Senate Committee on Health, Education, Labor and Pensions. Among the companies that might be affected: Apollo Group , DeVry University, Corinthian Colleges, ITT Educational Services and Career Education Corp.
It's important to remember that many companies will soar or sink based not on their industry's vulnerability to or advantages from Obama's re-election, but on management's ability to compete. So, while becoming aware of different industries' prospects for the next four years is helpful, it's no substitute for analyzing companies on their individual merits.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Craig J. Coletta has 20 years of experience in the financial industry. He is president of C.J. Coletta & Co., a Registered Investment Advisor firm, and president of Coletta Investment Research Inc. Coletta is a Chartered Financial Analyst charterholder, a Chartered Market Technician and a Certified Hedge Fund Professional. He holds a B.S. in accounting and business administration from Rider University, and is a member of the American Institute of Certified Public Accountants.