Five Places to Invest After the Midterm Elections

five places to invest after the midterm electionsThe stock market surged Wednesday on news the Republican Party will control both chambers of Congress in 2015.

The GOP picked up at least seven Senate seats during the election, with three spots still uncertain. The GOP will also gain 14 to 18 seats in the House of Representatives.

Republicans now control the budget and the legislative pen. While several Democratic votes will be necessary to pass new laws, here are five investment areas that will prosper after the GOP Congressional Wave.

Places to Invest After Midterm Elections, No. 1: Medical Device Manufacturer Stocks

While the U.S. economy was the top issue for 2014, Republicans campaigned against the Affordable Care Act (a.k.a. Obamacare).

The GOP successfully tied several Democratic senators to U.S. President Barack Obama's agenda. This particularly includes those who cast a fateful vote in 2010 for the healthcare law.

Despite dozens of recent House bills to undo the law, a full repeal of the healthcare law is highly unlikely. As President Obama has the right to veto any bill, Congress will aim to surgically remove unpopular provisions that hurt the economy or the healthcare sector.

One such provision is the Medical-Device Excise Tax. This tax carves out 2.3% of the gross income of medical technology sales in the United States.

It affects hundreds of small companies and has limited larger companies' domestic sales compared to their international profits. Right now, repeal has widespread support, even from a number of Democrats who supported its passage.

Senate Majority Leader Harry Reid supported the tax and avoided a vote on the matter. With Reid losing his position, expect the GOP to move quickly.

That's good news for U.S. medical device companies like Boston Scientific Corp. (NYSE: BSX) and Medtronic Inc. (NYSE: MDT).

Another sector that will benefit from a Republican-controlled Congress is energy - and two areas in particular...

Places to Invest After Midterm Elections, No. 2: Energy Infrastructure Stocks

One of the most frustrating political footballs in the past six years has been the Keystone pipeline.

Even though the Obama administration provided permits to numerous cross-border pipeline projects between the United States and Mexico, the Keystone pipeline from Canada faced delays to appease the environmental base of the Democratic Party.

With a GOP ready to draft a bill, and a number of pro-energy Democrats willing to support its construction, President Obama will have to make a decision about the pipeline's fate.

It's even possible that Congress could override a veto on this subject.

But TransCanada Corp.'s (NYSE: TRP) Keystone Pipeline is not the only potential beneficiary of Republicans' thirst for energy production...

The United States requires more than $641 billion in infrastructure spending to boost production from domestic oil and gas fields in the next two decades. Investors can expect efforts to reduce regulatory expansion in the energy sector to fast-track this infrastructure growth.

This creates opportunities for pipeline firms such as El Paso Pipeline Partners LP (NYSE: EPB), which builds and manages pipelines and storage facilities. Investors can also expect positive outlooks for rail operators like Southern Co. (NYSE: SO), which will continue to expand its network and capacity as the energy boom continues.

Another energy investment area that will get a boost centers on global trade...

Places to Invest After Midterm Elections, No. 3: Energy Exportation Stocks

A Republican-controlled Congress is likely to pass a law supporting free trade in the Pacific. President Obama's rubber stamp will likely follow should a bill pass soon.

The nation will begin exporting liquefied natural gas (LNG) in 2015 when it begins shipments from the Sabine Pass terminal on the border between Texas and Louisiana. The plant, owned by one of our favorite investments, Cheniere Energy Inc. (NYSE: LNG), will be the first export facility for fuels. Dominion Resources Inc. (NYSE: D) will also begin exporting LNG after it receives approval for its Cove Point terminal in Maryland.

But the other real profit opportunity comes from the coming surge of oil exports that is on the horizon. As Money Morning Global Energy Strategist Dr. Kent Moors has explained, the United States is about to end a 40-year ban on crude exports.

And investors can expect to make a lot of money by getting in now.

This next sector to invest in now has been struggling under increased regulation - but that could start to change...

Places to Invest After Midterm Elections, No. 4: Financial Stocks

The power of the purse is found in the House of Representatives since spending bills originate in this chamber.

But the power of the U.S. financial sector is shaped by the all-powerful Senate Banking Committee.

Democrats took control of this committee in 2008. Their signature law was the complex Dodd-Frank Act, a law designed to end "Too Big to Fail." Instead, it made Wall Street's titans even larger and made the future of the banking sector even less predictable.

Larger banks have been able to navigate the law, while smaller banks have struggled with increased regulatory costs and reduced return on capital. Investors in the second tier and third tier of banks by asset holdings can expect less burdensome conditions.

Regional banks with assets less than $300 billion are likely to benefit. That includes firms such as SunTrust Banks Inc. (NYSE: STI) and Fifth Third Bancorp (Nasdaq: FITB).

Finally, another sector long favored by the Republican Party will also prosper...

Places to Invest After Midterm Elections, No. 5: Defense Stocks

Republicans love to talk about slashing government spending.

But they can't seem to stop writing checks to one industry: the defense sector.

In the twenty-first century, U.S. defense is more than just buying tanks and building airplanes.

Cybersecurity spending continues to surge in Washington. Last year, the president's budget called for $13 billion in cyber spending, a figure that represented 16% of his federal IT budget.

Meanwhile, unmanned aircraft have reduced the need for an expansion of the U.S. Air Force's fleet and changed the face of war.

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That makes a company like Northrop Grumman Corp. (NYSE: NOC) an ideal investment for the Republican wave. In addition to supplying U.S. forces with warplanes, the company also operates a top-notch cybersecurity business and is one of the nation's leading drone suppliers.
So despite concerns about increased gridlock and Washington partisanship, the Republican Congressional Wave creates a number of profit opportunities.

Next: When it comes to what stocks do in general after midterm elections, it's best to look beyond what might happen this week or next and instead take a long-term view. And history gives us reason for optimism. Here's why...

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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