Stocks to Profit From a Swing to the Right
MINNEAPOLIS (Stockpickr) -- I never thought it was possible, but then again, anything is possible. Two short years after the American people rejected the policies of the Republican Party, the Grand Old Party swept the mid-year elections, taking back the House of Representatives and narrowing the gap in the Senate.
Boy, the electorate in this country is fickle. Now with the political pendulum swinging to the right, what does the change portend for stocks and the economy? More important, can money be made from the change in direction?
>>Also:
I've always said that the market is inefficient, and as such, opportunities for profit exist no matter the situation. The stock market is supposed to be a forward-looking instrument, but is often quite poor at predicting the future.
I highly doubt many expected such a landslide in opinion expressed in the most recent vote. Clearly there was a rejection of the current policies. The question that remains, then, is what
do
the people want?
Republicans will tell you that the people have spoken loud and clear. What they want is less government and less debt. They also want more jobs. How that is obtained is anyone's guess.
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Here is the scary part: The Tea Party that helped fuel Republicans to the victory on Tuesday actually has the potential to destroy our economy. With a need to increase the debt ceiling in order to fund our spending, those now in power could reject a bill to do just that via the filibuster.
Hold on to your seatbelts. The next year could be very interesting. Hopefully rationality prevails. If so, we can count on
certain sectors of the market to do well in the coming months
.
In the crosshairs of the new Congress will be the health care industry. Most if not all of the GOP has expressed interest in repealing the health care legislation that was passed (some would say railroaded) by Congress last summer.
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They may not have the power to make that happen, but that will not stop them from trying. The beneficiaries of such an effort will be stocks such as
United Healthcare
(UNH) - Get Report
,
Tenet Healthcare
(THC) - Get Report
and
WellPoint
(WLP)
. Even if full repeal is out of the question, these companies will benefit to the extent that health care reverts to being a more fully private endeavor.
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How about the defense industry? The wars in Iraq and Afghanistan may be winding down, but the war on terror continues. The recent bomb scare in Yemen suggests that the enemy is strong and getting stronger. With the GOP in power, you can assume that plenty of dollars will be spent on our defense.
Names to consider here include
Lockheed Martin
(LMT) - Get Report
,
Northrop Grumman
(NOC) - Get Report
and
L-3 Communications
(LLL) - Get Report
.
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Another industry that is very friendly with the Republican Party is the financial industry. Repealing Wall Street reform will be another effort of the next Congress. Despite help from the Tea Party, the GOP will gladly help their friends that finance their campaigns.
Look for names such as
Goldman Sachs
(GS) - Get Report
,
JPMorgan
(JPM) - Get Report
and
Blackstone
(BX) - Get Report
to do well with more friends in Washington. You can also put credit card names on this list. I expect
American Express
(AXP) - Get Report
,
Capital One
(COF) - Get Report
and
Mastercard
(MA) - Get Report
to do well in the coming year.
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As for the energy industry, this sector is a more tricky to analyze. On one hand, the oil and gas industry has long been in bed with the Republican Party. The flip side is that fiscal hawks may very well create a deflationary environment.
Until we get evidence to the contrary, I'm betting that cutting spending is easier said than done. Accordingly, look for inflation to be the order of the day. Oil and gas companies should do quite well with the new Congress.
In the oil patch I like names such as
Devon Energy
(DVN) - Get Report
,
Chesapeake Energy
(CHK) - Get Report
and
Transocean
(RIG) - Get Report
.
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Most of the names mentioned here have lagged the market under a pro-Democratic Congress and presidency. With Congress now leaning toward the right, these names should start coming to life. If a Republican takes the White House in two years, these stocks will be off to the races.
To see these stocks in action, check out my
.
-- Written by Jamie Dlugosch in Minneapolis.
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At the time of publication, author had no positions in stocks mentioned.
Dlugosch is the editor of Penny Stock Winners. He has over 20 years of experience in financial markets including investment banking, equity analysis and research and money management. In addition to being the Editor of Penny Stock Winners, he is also a Contributing Editor of InvestorPlace.com and founder and editor of The Rational Investor.
