Looking for stocks that should benefit now that Senator Obama is officially President-Elect Obama? Many investors believe that liberals negatively impact stock markets in general and that the only companies to benefit from a liberal adminstration are those that stand to get tax breaks or incentives.Personally, I don't believe that the market is going to go to hell in a handbasket just because Obama is now officially 'the man.' We have had some real rough times already and there are quite a few bargain stocks out there. An Obama victory looked more and more certain in the weeks approaching Election Day. There should not be a big negative reaction, because the markets will have already priced in the high likelihood of an Obama win. That being said, there should still be certain industries and stocks that are boosted more than others.
My pick for a strong industry under President Obama is the biotechnology sector, specifically those companies that work with stem cells. While not a major issue through the election cycle, Obama has generally favored the removal of federal stem cell restrictions, including research on embryonic stem cells. A few years ago, the Stem Cell Research Enhancement Act of 2005 was approved by both the House and Senate, but vetoed by President Bush. The House failed in its attempt to override the veto. Obama voted in favor of the measure in the Senate and it is not a stretch to think that in the next two years with a Democratically-controlled Congress that a similar measure would be brought up and passed without much opposition.
Osiris Therapeutics (NASDAQ: OSIR - option chain) is a leader in the stem cell industry, and currently uses cells harvested from adult bone marrow. OSIR has recently partnered with Genzyme (NASDAQ: GENZ- option chain) to sell two of its developing drugs internationally. OSIR retains the rights to these therapies in the US and in Canada. OSIR received $130M up front for these rights, but the agreement calls for more payments (up to $1.25B) depending on future sales.
I make the assumption that OSIR would be one of the best-positioned companies in the event that embryonic restrictions are lifted, since it has such a market presence at this time.
OSIR just reported its first positive earnings yesterday, which is a good sign for an up-and-coming biotechnology stock.
Generally, I don't talk about young, small- or mid-cap stocks, so please bear in mind that OSIR is a speculative stock and should not be thought of as a core holding. It is probably cheap enough that there is not much benefit to be gained by buying options or getting into complex options strategies like those I usually talk about. Instead, this one has the potential for some really big rewards if things work out in its favor.
If you were looking for a hedged options trade like those usually seen in my posts, I would consider Genzyme, the new partner of Osiris. For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $60 range. That has the potential to make 11.1% in 10 weeks as long as GENZ doesn't fall by more than 19% in that time.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in OSIR nor GENZ.
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