Corporate spending will be driven in very predictable directions.
One of the first things we will see is a movement away from full-time employees to more flexible temporary staffing. As employment costs and corporate taxes increase, you will actually see more reliance on outside consultants. Professional services firms like Accenture (ACN) - trading at $38.92 - should do very well.
One of the big beneficiaries of a higher corporate tax rate will be the nation of Ireland. Ireland enjoys some of the lowest corporate tax rates in the world (12.50%) and a highly educated workforce. If U.S. corporate tax rates do in fact go higher, watch for some big moves out of some Irish stocks as U.S. companies start moving to Ireland. One in particular to put on your radar is ICON (ICLR) - trading at $39.49 - which provides outsourcing services to the pharmaceutical, and biotechnology industries and the stock has been on fire.
To meet the lofty goal of energy independence within 10 years without the use of expanded domestic drilling, coal or nuclear energy will require an enormous allocation of capital to the alternative energy space. Everything from power generation to power delivery will have to be revamped. There will be some obvious companies that will benefit from this spending spree.
Energy Conversion Devices (ENER) - trading at $55.27 - makes thin-film solar cell products, nickel metal hydride batteries, and phase-change memory devices. While the stock has been roughed up of late, an Obama win could have this one in the stratosphere.
Another player in the alternative energy space that has been flying under-the-radar is LDK Solar (LDK) - trading at $40.76 . The company turns polysilicon into multicrystalline wafers, which are used in the construction of solar cells and solar modules. The company uses recycled materials in its production process and two -thirds of its business currently comes from Asia. With an Obama win, LDK stands to dramatically increase its U.S. business.
Good old General Electric (GE) - trading at $28.81 - could also be a big beneficiary of expanded alternative energy spending. Its going to take a lot of GE wind turbines and a massive infrastructure build out to make wind work and GE has the background and know-how when it comes to monster-sized projects.
At the end of the day, accelerating corporate earnings growth is what drives stock markets higher. I must admit that I am struggling to find where the broad-based earnings growth will come from should Barack Obama win the Presidency. This isn’t a partisan thing, it’s a business observation thing.
What’s your opinion? What stocks or sectors do you think will do well with an Obama win?
