With U.S. President Barack Obama holding a narrow lead in the polls over Republican challenger Mitt Romney, investors need to be prepared for a win by either candidate.
Strangely enough, history has shown that the stock market actually does much better under Democratic presidents than Republican ones - three times better since 1913, according to The New York Times, and more than five times better since 1960.
Of course, that doesn't mean there won't still be plenty of stock market opportunities if Romney wins the election. It just means investors must be a bit more selective, targeting leading stocks in industries that have a history of prospering under GOP policies, especially those directly affected by planks in the Republican platform.
Sectors that fall into this category include certain health insurers, medical device makers, energy companies, domestic oil exploration outfits, utilities, transportation firms (especially railroads), and defense contractors.
Let's take a look.
The fortunes of the health insurers and medical manufacturers are, of course, linked to the fate of the Patient Protection and Affordable Care Act (PPACA) -popularly known as "Obamacare."
Romney and the GOP are committed to repealing the universal healthcare program, which mandates insurance coverage for every citizen and imposes numerous taxes and reductions in doctor and insurance reimbursements to pay for it.
As the Obamacare law is currently written, it would cut deeply into the revenue of companies providing commercial health insurance plans, especially those covering managed-care programs and offering supplemental insurance to seniors on Medicare - so called Medicare Advantage plans.
Analysts for Citigroup Inc. (NYSE: C) recently projected these companies could see an annual drop of up to 15% in revenue and earnings if Obamacare survives, but would likely see earnings rise by 10% or more if it is repealed.
Given that, two healthcare companies to look at if Romney wins election are:
For medical equipment makers, the biggest Obamacare blow is a new 2.3% excise tax on U.S. sales, scheduled to go into effect Jan. 1, 2013. If Romney wins the election, he'd likely cancel the tax, which would benefit companies such as:
Romney has pledged not to make any cuts in defense spending, a likely target of the Democrats should President Obama be re-elected. Many defense contractors might see sharp cuts or even elimination of some major weapons programs should President Obama prevail. If Romney wins the election, one defense contractor to benefit would be:
Another feature of Obamacare is a 3.8% "Medicare contribution tax" on higher-income individuals. That tax - coupled with elimination of the "qualified" dividend status should the Bush tax cuts be allowed to expire at year's end - would cause the tax rate on most stock dividends to skyrocket from 15% to as much as 43.4%.
High-dividend utility companies would, needless to say, get hammered as income investors flee for other more lucrative vehicles. But Romney has not only pledged to restore the "qualified" dividend designation, he says he'd exempt dividends from income taxes entirely. That would give a big boost to gas, electric and telecom companies, such as:
Finally, an election win by Romney and the Republicans would almost certainly ease environmental regulations on energy companies that use coal-fired power plants. That would help both the utilities and the transportation companies that handle the coal, particularly the railroads. The best bet among the rails could be:
A note of caution if Romney wins election: One reason stocks have thrived under President Obama - the S&P 500 is up about 73.2% since his inauguration in January 2009 - has been the easy-money policies of the Federal Reserve under Chairman Ben Bernanke.
However, Romney says if he's elected, he won't reappoint Bernanke when his current term expires in 2014. Uncertainty over both a possible successor and a potential increase in interest rates could well keep a cap on near-term stock market advances.
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