This post was written by Minyanville contributor Sean Udall.
Through my career I've generally stayed apolitical with regard to investment and trading decisions, but there have been times when some higher percentage trades have presented themselves due to political circumstances. Examples include: the tech push in Clinton's second term, the defense sector after Bush's 2000 victory, as well as the oil patch. Based on that, here are some overriding thoughts, in no particular order.
The market has moved to the phase where many if not most participants want and expect a pullback. Since the market confounds the greatest number of players most of the time, is a big pullback a lower probability event now? Moreover, does the selling panic of much of October turn into a buying panic in the coming weeks and months? I'm letting the charts lead me here but aware that this bullish case could possibly trump terrible economic conditions.
I still think the alt energy patch (solar, wind, battery tech, clean coal) will produce some of the best winners, but a lot of easy money has been made in just days. Quality and fundamentals will likely count much more now than over the past few months. Also, extended runs may become vulnerable quickly if policy decisions do not show quick tangible follow-through. Companies with the best balance sheets and funding sources will benefit the most and have the least downside on sharp technical pullbacks.
Technology may benefit as much as any sector and the table is certainly set for strong future performance. Balance sheets are supportive as debt levels are low or non-existent. Valuations are at historical trough levels even after the recent run off lows. Specifically, certain internet infrastructure and data storage names have continued to deliver strong relative results (F5 Networks (Nasdaq: FFIV) , Citrix Systems (Nasdaq: CTXS), Juniper (Nasdaq: JNPR), Akamai (Nasdaq: AKAM), VMWare (NYSE: VMW), etc.), and could see a further push as the government is due (and approved) to spend tens of billions on IP broadband, bandwidth storage and security.
There has been and continues to be a growing need for traditional brick and mortar infrastructure. This area is ripe for 'the new new deal'. Water facilities, utilities, refining, the national power grid, bridges, highways and many others are in various states of disrepair or in massive need of additional capacity. Instant job creation exists for this group and many companies can benefit. The whole engineering/construction group is still down 45-70% off highs even after double digits gains of late. Some of my favorites in this area are Fluor (NYSE: FLR), McDermott (NYSE: MDR), Quanta Services (NYSE: PWR), Aecom (NYSE: ACM) and KBR (NYSE: KBR), but you might be able to throw darts at many of the leaders currently.
The retail group will still be a hit or miss sector but it also moves the most from extreme changes in sentiment. Any sense of optimism or even a sense that the darkest of the days are past can get many of these stocks to move well ahead of real fundamental improvement. One particular name that is the premier seller of electronics, gaming and various home entertainment gear is Best Buy (NYSE: BBY). A year ago this stock was around $50, but three months ago the stock was still in the low $40's and many pundits thought it was cheaply valued then. Yesterday, the stock closed at $27 (below its 2004 lows) and BBY is facing less competition in the future due to competitors closing stores. Strong leaders gain share during tough times and that is exactly what is happening at BBY. 
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Reader Comments (Page 1 of 1)
11-05-2008 @ 2:03PM
Jim said...
I do not understand how Obama is picking stocks? Is this just a ploy to try to get people to invest their hard earned money into some of the companies that will be worthless after the holiday season? I am sure that Preseident elect Obama is taking time out to tell you what stocks are good and bad. Last I checked this is illegal.
In ending please do not confuse some of the American People using his name on picking stocks. your not fooling me or anybody that knows the system.
As far as I am concerned whom ever wrote this article should retract and spell it out for all to understand. Some of the stocks mentioned are good but many are not.
11-05-2008 @ 2:39PM
Iridium said...
The biggest problem with energy stocks will be if Obama is able to indroduce a cap and trade system. Credit traders will make out with billions but the average consumer will be paying a huge increase in energy costs.
Dominion Gas in Ohio lobbied to have a base increase in delivery costs and got it passed through. I just have cooking gas. The previous base delivery charge was $8. It has now been increased to $15.
The actual bill for my gas use was $.62 and my taxes were $2.00. I now pay around $17 for $.62 of actual gas use. That is crazy.
Fine $17 doesn't break the bank but it is still a nearly 100% increase in cost. 100% inflation.
With the proposals Obama is pushing my electric bill will probably follow my gas bill. Instead of $25-30 a month for $15 of actual energy use I will pay $50-70. The situation will be a lot worse for households.
When you add this on top of higher taxes and declining income you have a recipe for disaster. The current finacial crisis will pale in comparison.
11-05-2008 @ 5:07PM
carol said...
You Obama fans - you are getting what you deserve! Higher gas and electric prices, higher everything. ENJOY!
11-24-2008 @ 12:44PM
Michael said...
In ending please do not confuse some of the American People using his name on picking stocks. your not fooling me or anybody that knows the system. As far as I am concerned whom ever wrote this article should retract and spell it out for all to understand. Some of the stocks mentioned are good but many are not.
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Michael
MLS
11-24-2008 @ 12:47PM
Michael said...
In ending please do not confuse some of the American People using his name on picking stocks. your not fooling me or anybody that knows the system. As far as I am concerned whom ever wrote this article should retract and spell it out for all to understand. Some of the stocks mentioned are good but many are not.
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Michael
[url=http://mls.fastrealestate.net]MLS[/url]