5 policy-proof stocks that will survive Obama

Even if big changes come out of Washington, these companies could thrive.

By InvestorPlace Feb 2, 2010 5:50PM

Capitol © Donovan Reese/Getty ImagesBy Jon Ogg, InvestorPlace.com

 

Everyone wants to know which sectors are likely to be immune to political changes -- and which stocks from those sectors will actually thrive under Obama's budget and political and social ambitions. 

 

With that in mind, let's take a closer look at the various sectors of the financial markets to see which companies might be immune to or at least far away from the focus and criticism of any current Washington trends.


All companies have implied market risks tied to them, but there are several stocks that seem likely to survive, and even thrive, under the current administration's plans.

 

USEC Inc. (USU) was an Obama wild card, but it's just become a flavor-of-the-day stock, thanks to a new budget that effectively doubles the provisions for nuclear power loan guarantees. Although this part of the budget is not yet a sure thing, it has not been completely given a green light by Wall Street either -- and there are memories of disappointments from 2009 that are hard to erase. The administration had been anti-nuclear power going into the election but then became more accepting of it. Then, last summer, the DOE denied the loan guarantee that USEC was counting on for its new centrifuge project in Ohio. 

 

If nuclear is really going to be included, then USEC is the top play here with the largest leverage to the upside and perhaps what may already be a floor underneath. The stock was at $3.79 before the run. Now shares are well above $4 after our Obama Nuclear Stock Option Alert. Additionally, the company has the Nuclear Nonproliferation Megatons to Megawatts Program, and that is a win because the administration said that further nuclear weapon elimination between the United States and Russia is on its way.

 

Next is the initiative of energy efficiency, which is cheaper and easier to achieve today than adding a bunch of new energy sources. One company already winning in this area is Itron (ITRI), which produces smart meters for electric companies. The opportunity here is exponentially larger than what the company has as orders on the books, and it has made announcements of smart-meter wins in 2009 on stimulus money. It was also just recognized by the DOE for smart grid solutions contributing to the clean-energy economy. The big issue with Itron is one of valuation versus opportunity, but if the company lives up to its 50% earnings growth this year, then it trades "only" at about 21 times forward earnings. 

As far as which banks will thrive under the new regulatory climate -- the larger regional banks that do not have large trading departments or untold billions in government loans will continue to grow and compete on the loan front. The iShares Dow Jones US Regional Banks (IAT) contains more of the regional banks you have heard of, but it is thinner volume than some investors prefer to see. The SPDR KBW Regional Banking (KRE) is very liquid, with the caveat that many of the banks inside this ETF are unheard of if you have not followed the regional banking sector. It also seems unlikely that any of these banks will be broken up, but you have to consider that not all of the banks inside these two ETFs escaped the financial meltdown totally unscathed. These two ETFs probably have a premium built in as they have traded up so far in 2010. (Read: "4 Bank Stocks Thrilled About Obama's Bank Plan" for more regional banks set to surge.)

Ford Motor (F) is an unlikely Obama winner on the surface, but the past year speaks for itself. Alan Mulally has turned out to be a stellar CEO, and the administration would hope that the future GM and the future Chrysler could be half as profitable as Ford has been. Ford did not go to the government hat in hand even if it did win in the Cash for Clunkers program. It posted a 2009 profit, and it seems to be immune to customer and taxpayer backlash as the U.S. auto sector is getting close to back on its feet. It seems to have most of its union issues at bay, which is pro-Obama as well. Ford now wants to remain profitable, and it makes sense that the Obama administration would point to an American success story such as Ford as the model for GM and Chrysler to follow. The big risk here is the economy and the chance of a double-dip recession, but that is true for most manufacturers today.

 

For more policy-proof stocks, read: "8 Stocks That Have Nothing to Fear from Obama."

 

At the time of this writing, the author did not own shares of USU, ITRI, IAT, KRE, F.

 

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