Play Your Local Stocks for a Bush or Kerry Win

Kerry Index

Sector: Pharmaceuticals
Washington angle: Short sales of ZymoGenetics and Icos

ISI analysts contend that a Kerry administration may attempt to use regulatory authority to undermine the private-sector delivery of the Medicare drug benefit and also attempt to amend the act, allowing the government to negotiate prices. Kerry also supports a broad drug-reimportation bill and slaps Big Pharma around in his stump speeches.

Sector: Utilities
Washington angle: Short sales of Avista and Puget Energy

It's the opposite of the Bush story. The potential for a Kerry-era repeal of lower dividend tax rates would hurt the appeal of all high-yielding companies. At the same time you could see tougher emissions requirements that would boost spending with no revenue offset. ISI points out that a goal to produce 20% of energy from renewable sources by 2020, as has been proposed, would also require an increase in R&D spending without an offset of higher revenue.

Sector: Cars and trucks
Washington angle: Short sale of Paccar (PCAR Quote)

It's that do-gooder streak again. A Kerry administration is likely to push for higher fuel economy standards, which could cut into the profits of a company like Paccar, which makes Kenworth and Peterbilt trucks.

Sector: Banking
Washington angle: Washington Federal (WFSL Quote) and Washington Mutual (WM Quote)

If Kerry wins but the Democrats are unable to pick up enough seats in Congress to obtain voting dominance, then we may see the best of all worlds: absolute legislative stalemate. This was one of the secrets of the great 1990s boom, as a Republican Congress butted heads with a Democratic White House, allowing few important bills to pass.

This would allow the natural economic cycle to work with a minimum of government intervention, permitting an increase in jobs and higher income for which both parties would claim credit. Banks and savings and loans would benefit from a rise in the savings rate and, probably, a continuation in the trend toward wider home ownership.

Sector: Retail
Washington angle: Nordstrom (JWN Quote), Costco (COST Quote) and Starbucks (SBUX Quote)

Same as above. A stalemate in legislation would forestall any acts of Congress aimed at raising taxes significantly, and generally lead to market forces permitting an increase in consumer spending. Retailers across the spectrum -- from value-oriented Costco to luxury-oriented Nordstrom and devil-may-care Starbucks -- would benefit.

Sector: Technology
Washington angle: Microsoft (MSFT Quote)

A Kerry administration is expected to be more hawkish than a Bush administration on intellectual property rights. That's a matter close to the hearts of Hollywood and Silicon Valley, where companies wish to protect their copyrights and patents for as long as possible -- preferably forever. Microsoft is one of the largest patent-holders in the world, and it would probably benefit from an administration more focused on strengthening intellectual property rights.

I'll track these two indices over the next six weeks and the next four years and let you know how they turn out.

All Politics Is Local The Bush and Kerry portfolios for Washington state
Company	Industry	Sept. 24 Close	% Change YTD to Sept. 24	Long/Short
Bush Portfolio
ZymoGenetics (ZGEN:Nasdaq)	Drugs	$17.98	16%	Long
Icos (ICOS:Nasdaq)	Drugs	23.7	-42.6	Long
Dendreon (DNDN:Nasdaq)	Drugs	8.98	11.4	Long
Boeing (BA:NYSE)	Defense	53.14	26.1	Long
Esterline Technologies (ESL:NYSE)	Defense	30.36	13.8	Long
Avista (AVA:NYSE)	Utilities	18.1	-0.1	Long
Puget Energy (PSD:NYSE)	Utilities	22	-7.4	Long
Safeco (SAFC:Nasdaq)	Insurance	46.2	18.7	Long
Longview Fibre (LFB:NYSE)	Paper	14.71	19.1	Long
Potlatch (PCH:NYSE)	Paper	45.41	30.6	Long
Weyerhaeuser (WY:NYSE)	Lumber	63.76	-0.4	Long
Kerry Portfolio
ZymoGenetics (ZGEN:Nasdaq)	Drugs	$17.98	16%	Short
Icos (ICOS:Nasdaq)	Drugs	23.7	-42.6	Short
Avista (AVA:NYSE)	Utilities	18.1	-0.1	Short
Puget Energy (PSD:NYSE)	Utilities	22	-7.4	Short
Paccar (PCAR:Nasdaq)	Trucks	67.69	19.2	Short
Washington Federal (WFSL:Nasdaq)	Banks	25.08	-2.8	Long
Washington Mutual (WM:NYSE)	Banks	39.17	-2.4	Long
Nordstrom (JWN:NYSE)	Retail	39.58	15.4	Long
Costco Wholesale (COST:Nasdaq)	Retail	41.35	11.2	Long
Starbucks (SBUX:Nasdaq)	Retail	45.04	35.8	Long
Microsoft (MSFT:Nasdaq)	Software	27.29	-0.3	Long
Source: MSN Money