This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.
"Like a neglectful homeowner who has let their house fall into a dilapidated state of disrepair, the federal government has quite a bit of housekeeping to do; if Obama wins the election, we would look towards infrastructure plays such as Fluor (NYSE: FLR)," says Nathan Slaughter, editor of Half-Priced Stocks.
"You may remember the tragic collapse of a Minneapolis bridge last year that took 13 lives. According to the Federal Highway Administration, this is not a one-time incident but a potential epidemic.
"By their estimates, 152,000 of the nation's 600,000 bridges (1 in 4) either require substantial work or have become obsolete and need to be replaced entirely.
"The overall price tag to bring all these bridges up to date: about $140 billion. And the American Society of Civil Engineers (ASCE) believes that bridges are actually in pretty good shape when compared to other crumbling infrastructure.
"Across the country, we have 3,500 unsafe dams in need of repair and hundreds of locks that must be fixed to allow cargo barges to navigate through inland waterways.
"Sewage treatment facilities are outdated; corroded pipes leak 6 billion gallons of drinking water daily; and maintenance on energy transmission lines has been steadily dwindling for over a decade.
"Throw in aging transit systems, highways, landfills, and ports, and the ASCE has graded America's overall infrastructure a "D" and puts the repair bill at a staggering $1.6 trillion.
"And Obama will not shy away from big government projects. In fact, the senator has gone on record as saying 'it is critically important for the United States to rebuild its national infrastructure.'
"And this isn't just hollow campaign rhetoric. Obama has thrown his support behind the National Infrastructure Bank Act, which would free up tens of billions to support various infrastructure projects.
"By all accounts, a massive amount of cash will be needed to bring our infrastructure into the 21st century, and much of that will find its way into the coffers of heavy construction companies like Fluor.
"The Texas-based company is a global heavyweight in the engineering, procurement, construction and maintenance (EPCM) field with nearly $20 billion in annual revenues.
This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.
Which stocks would benefit from a victory by either Senator John McCain or Senator Barack Obama? To help investors sort through the sectors and stocks best positioned to benefit in a post-election environment, we posed this question to some of the nation's leading financial newsletter advisors.
Importantly, this is not a partisan report; each participating advisor has provided a favorite stock for both candidates, focused not on political preferences but unbiased stock analysis. Below we feature those stocks and ETFs that the advisors believe will be the winners depending on which candidate prevails.
Stanford raised Fluor (NYSE: FLR) to Hold from Sell primarily due to valuation.
Citigroup upgraded Cadence Designs (NASDAQ: CDNS) to Buy from Hold because they think the company's cost restructuring initiative and its new CFO will be catalysts for the shares.
Analyst downgrades:
Stephens dropped Ann Taylor (NYSE: ANN) to Equal Weight from Overweight because they no longer view LOFT as a compelling reason to invest in the company.
Citigroup downgraded Hershey (NYSE: HSY) to Hold from Buy on valuation.
KeyBanc dropped Lennox (NYSE: LII) to Hold from Buy on valuation.
Analyst initiations:
Coverage of Hershey was assumed with a Sell by Stifel, which cited valuation for its rating.
Leerink Swann resumed coverage of Cardionet (NASDAQ: BEAT) with an Outperform, as the firm predicts that the company's technolgoy will enable it to grow substantially.
Fluor Corporation (NYSE: FLR) provides engineering, procurement, construction management and project management services worldwide. Projects involve the design and construction of manufacturing facilities, transportation infrastructure, refineries, healthcare buildings, power plants and telecommunications infrastructure. The company also provides administrative and support services to the U.S. government. The oil and gas sector accounts for about 50% of sales. Commercial clients include Exxon Mobil (NYSE: XOM), General Motors (NYSE: GM) and DuPont (NYSE: DD).
Investors were pleased last week, when the company reported Q1 EPS of $1.50 and revenues of $4.81 billion. Analysts had been looking for $1.27 and $4.64 billion. Officials said that consolidated backlog rose to $31.5 billion, up 33% from the year ago period. Management also guided FY08 EPS to $6.25-$6.55, versus consensus of $5.63.
This gigantic beat also serves to remind us of the big dichotomy. You are either in the energy and petroleum products game or you are in a lot of games that don't work.
It's not easy for these companies, some of which have lived off the duress of state and local governments, including Shaw (NYSE: SGR) (Cramer's Take) and to a certain extent Aecom (NYSE: ACM) (Cramer's Take) and URS (NYSE: URS) (Cramer's Take), to become oil-and-gas plays.
The only ones that have transcended it beside Fluor are Foster Wheeler (NASDAQ: FWLT) (Cramer's Take) and Jacobs Engineering (NYSE: JEC) (Cramer's Take), and the only reason you would really know that is longevity. I remember in the early 1980s when FLR and then FWC would compete directly for all of the huge projects after the second oil shock.
TheStreet.com's Jim Cramer says three widely held beliefs are just too bullish to be true.
Sometimes it just hits you. You will be reading an article about some fund manager somewhere who sounds perfectly intelligent and you will spot it, the holy grail of the moment -- THE CONSENSUS. I won't mention the fellow's name -- it is unimportant -- because he's good at his job, but the thoughts he is currently expounding sound like many others I hear, to wit:
1. Oil prices will fall to $80 a barrel.
2. The dollar will rise when the Fed stops cutting rates.
3. GDP growth in China will slow.
First, let me just say that those events would be bullish for every domestic company in our universe, including the financials, and we would have a miracle bull market where less than 20% of the market -- ag/mineral/oil and gas/infra --collapses and fully 80% of the market can rally (I am including the health care stocks because, somehow, they have been seen to become hostage to the weak federal government, and in this scenario I don't see the federal government as worried about cutting back spending).
MOST NOTEWORTHY: Fluor, Forward Air and McDermott were today's noteworthy upgrades:
Citigroup upgraded shares of Fluor (NYSE: FLR) to Buy from Hold to reflect the company's strong performance and backlog in Q4 and raised their target to $190.50 from $158.
Baird upgraded Forward Air (NASDAQ: FWRD) to Outperform from Neutral citing near-term growth initiatives that are gaining traction.
Citigroup also upgraded shares of McDermott (NYSE: MDR) to Buy from Hold to reflect the company's strong Q4 performance and rising commodity prices.
Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Fluor is worth a review.
Fluor Corporation (NYSE: FLR) is one of the world's largest engineering, procurement, construction and maintenance companies. The company oversees construction projects for a large range of industrial sectors worldwide, primarily in its core strengths: designing and building manufacturing facilities, refineries, pharmaceutical facilities, healthcare buildings, power plants, and telecommunications and transportation infrastructure.
Analysts see 20-25% revenue growth for F2008, after likely 15-18% revenue growth in F2007, driven by strong demand for oil and natural gas projects.
MOST NOTEWORTHY: BioScrip, Chipotle Mexican Grill and CoStar Group were today's noteworthy upgrades:
BioScrip (NASDAQ: BIOS) was raised to Buy from Neutral at Broadpoint, as they believe the company's specialty business is worth more than the current price implies.
Baird upgraded Chipotle Mexican Grill (NYSE: CMG) to Outperform from Neutral following Q4 results, citing valuation and a positive view on fundamentals.
CoStar Group (NASDAQ: CSGP) was upgraded to Outperform from Market Perform at JMP Securities, as they expect the company to report a solid quarter next Thursday.
TheStreet.com's Jim Cramer says there are some names that will work here, but they're a small slice of the total market pie.
Can someone, anyone, tell me why we can bank on this Fed? "The Fed has to cut 50 basis points or we are going to Dow 12,500."
Yeah, OK. I get it. Fed panicked and cut 50 last time we were shocked with a weak employment number. Maybe they will do it again.
But I look at it a different way. This Fed thinks it is smarter than all of us. It looks at ways to tinker to bring down the short-rates without attacking them head on. They are clever.
BorgWarner (NYSE: BWA) to give business update at 10am.
Burger King (NYSE: BKC) to report Q1 earnings; conference call at 10am.
Tuesday, November 6
Merrill Lynch to host conference call discussing Focus Media's (NASDAQ: FMCN) secondary offering at 11am.
Yahoo (NASDAQ: YHOO) CEO Jerry Yang, Senior VP Michael Callahan & General Counsel to testify before the House Foreign Affairs Committee on how their company gave false information to Congress relating to their role in a human rights case in China which resulted in a journalist being sent to jail for 10 years.
MOST NOTEWORTHY: Starbucks Corporation, Brinker, Healthways and Fluor were today's noteworthy downgrades:
Banc of America downgraded Starbucks Corporation (NASDAQ: SBUX) to Sell from Neutral, and lowered their target to $23 from $27, as they see downside risk to estimates due to slower growth. The firm is concerned that expectations for a near-term recovery are too high.
Goldman downgraded Brinker International (NYSE: EAT) to Sell from Neutral citing macro economic pressure on sales.
Credit Suisse downgraded Healthways Inc (NASDAQ: HWAY) to Neutral from Outperform on valuation.
Fluor Corporation (NYSE: FLR) was downgraded to Hold from Buy at Morgan Joseph on valuation.
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Should you sell into today's rally? Yes, if you think there are more surprises to come (I do)
The week in preview: Mulling over techs, financials
'Crash-and-burn economy?' 'Bailout beer bust?' What should we call America's economic disaster?
