How to profit from the Obama economy

Restoring the country's financial health will be one of the incoming president's priorities. These 5 sectors are likely to get the biggest boost.

Rate this Article

Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest) LowHigh
By John Dyer, MSN Money

It's time for investors to prepare for change under Barack Obama.

No, the Wall Street meltdown isn't over. Main Street is still sinking into a recession. Portfolios are still getting hammered. But there's no doubt the new president will create different economic conditions that could present opportunities for investors savvy enough to spot upward trends.

Barring a major international incident or terrorist attack, few doubt that Obama's first order of business as chief executive will be to address the country's economic crisis. Ideally, analysts say, bold new leadership will bring a new sense of optimism.

What should Obama change first?

"If Obama comes in, regardless of what people think of Republicans and Democrats, and he changes the confidence of people, then that will basically cause them to spend more, and that basically is what's going to cause things to turn around," said Anu Sharma, the managing director of the Nasdaq Market Intelligence Desk.

Any new direction will be welcome after the malaise of President Bush's second term, said Robert Johnson, the associate director of economic analysis at Morningstar, an investment research firm.

"We haven't had a leader for a few years," he said. "Bush was so wrapped up in the war, he's providing zero leadership on this economic front."

Backed by solid Democratic majorities in both chambers of Congress, Obama clearly has the opportunity to make substantive changes. He is entering office at a time when even his political opponents no longer view government as solely an impediment to economic growth. Though Obama will be constrained by the weakened economy, the political climate in the wake of the crisis on Wall Street might give him latitude to regulate and spend in a way that hasn't been seen since the Carter administration.

MSN Money has looked at some Obama proposals that could bring rapid growth to five sectors of the economy. Some of these areas were likely to grow no matter who became president. But Obama might accelerate their growth. A couple of others will rely more heavily on government support.

1. Biotech

In his campaign platform, Obama called the Bush White House "one of the most anti-science administrations in American history." That assessment rests in part on Bush's 2001 edict limiting the federal government's role in stem-cell research. Now that Obama will be assuming office, the biotech sector is expecting a change of fortunes.

"We're quite aware of the fact that Senator Obama is in favor of an end to the ban," said James Greenwood, the president of the Biotechnology Industry Organization, a consortium of biotech companies, universities and investors that specialize in medical science.

Continued from page 1

Greenwood expects larger budgets for the National Institutes of Health, the Food and Drug Administration, and other science-related agencies that pump billions in grants into research institutions. With more funding, Greenwood said, those institutions would need more of everything from glass pipettes to cell cultures supplied by companies such as Becton, Dickinson (BDX, news, msgs), Invitrogen (IVGN, news, msgs) and Thermo Fisher Scientific (TMO, news, msgs).

2. Green energy

Obama's presidential rival, Republican Sen. John McCain, emphasized offshore drilling and nuclear power as the best routes to energy independence. Obama embraces green technologies and renewables, such as wind and solar energy.

Obama has pledged to spend $150 billion over 10 years to promote green technologies and has said that a quarter of America's electricity should derive from renewable sources by 2025. While he supports development of clean coal technology, Obama has been more emphatic about wind and solar power.

See wind turbines in action

David Schoenwald, the founder of the New Alternatives Fund (NALFX), said Obama is likely to reverse federal policies that have discouraged investment in green energy. Those policies held back U.S. companies and allowed foreign companies -- including Danish energy giant Vestas Wind Systems (VWDRY, news, msgs) -- to take the lead, Schoenwald said. The New Alternatives Fund has net assets of $246 million and has been investing in environmentally friendly industries since 1982.

Chart: Is 'green' good for business?

"I've seen the platform, and I've seen how he's voted, which has generally been positive," Schoenwald said. "Maybe there will be a kind of Depresson-era Works Progress Administration, and maybe alternative energy will fit into that."

 
Related story:

13 stocks to fight global warming

3. Infrastructure

When the Interstate 35W bridge in Minneapolis collapsed last year -- two years after federal levees failed to protect New Orleans against Hurricane Katrina -- Americans started to wonder why the most powerful country in the world didn't seem to have anywhere near the best infrastructure.

The answer is that infrastructure is costly. State and local governments frequently aren't up to the challenges of financing it.

For years, experts have been saying the federal government should step into the breach to build roads, bridges and other facilities. Given the weakness of the economy and the Democratic Party's historical penchant for large public-works projects, conditions are right for a massive public-spending campaign. And it doesn't hurt one bit that much of the infrastructure need is in heavily Democratic big cities such as Chicago, the new president's hometown.

Continued from page 2

"Even if the economy wasn't in the tank, he'd want to do these things," said Nigel Gault, the chief U.S. economist for Global Insight, a financial analysis company. "With the economy in the tank, these are things he wants to be doing."

Obama has called for the creation of a $60 billion "National Infrastructure Reinvestment Bank" to help states build. Not surprisingly, builders like that. Investors who pick the right builders might like that, too.

Companies such as Hochtief (HOCFF, news, msgs), a German company that owns Turner Construction in New York, and Skanska (SKSBF, news, msgs) of Sweden are the types of building giants that could gain from more capital spending. Mexico's Cemex (CX, news, msgs), one of the largest cement producers in the world, might also profit.

4. Advanced manufacturing

Obama has said he wants to create an "Advanced Manufacturing Fund" modeled after Michigan's $2 billion 21st Century Jobs Fund, which gives seed money to startups and invests in venture-capital funds specializing in high-tech companies. The Michigan fund recently gave $5 million in tax credits to EcoMotors International, a developer of new kinds of diesel engines.

Most individual investors won't be able to benefit from a nationwide version of Michigan's fund until the companies that receive money become successful enough to go public. But smart investors will keep tabs on the companies.

Emily Mendell, the vice president of strategic affairs for the National Venture Capital Association, said a little homework on startups might bring investors huge rewards. Just look at Amgen (AMGN, news, msgs), Genentech (DNA, news, msgs) and other biotech companies that started off with venture capital, she said.

"The venture-capital industry made the (biotech) industry," she said.

Mendell suggested that a lot of the growth in biotech came from private-public partnerships of the sort Obama seems to favor.

"From a portfolio perspective, that's where these companies come from," she said.

If credit markets remain tight, Obama's proposal could also provide key support to small-cap and midcap businesses.

That could be critical, said Sharma, of Nasdaq's Market Intelligence Desk.

"It will be extremely important," he said. "They will need a source of funding, either from venture-capital firms or private-equity firms."

Continued from page 3

5. Information technology

The Internet could be another winner under the Obama administration. The new president has called for expansion of broadband fiber-optic networks. That could bring big rewards to companies such as Verizon Communications (VZ, news, msgs) that already supply the technology and could capitalize on government incentives.

Before the presidential election, Robert Atkinson, the president of the Information Technology and Innovation Foundation, predicted that "an Obama administration would be more proactive when it comes to broadband." He added, "The odds are quite high there would be more programs to spur computer ownership and broadband for low-income people."

Atkinson suggested that the use of the Web in health care is set to explode under Obama. He pointed out that Obama wants to spend $10 billion to help develop systems that can store and transfer patients' information. Today, most medical institutions continue to store patient information on paper, and the paper shuffling contributes heavily to the soaring cost of health care. Health-related companies with established Internet platforms, like WebMD Health (WBMD, news, msgs), could stand to gain.

"Anyone who is in the space of health IT will do very, very well in an Obama administration," Atkinson said. "Obama has no qualms about saying we need a really, really big role for government to make this transition work."

Produced by Elizabeth Daza

Published Nov. 11, 2008