Gore good for health-care, fuel cells

By Deborah Adamson, CBS.MarketWatch.com
Last Update: 9:36 AM ET Oct 31, 2000
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NEW YORK (CBS.MW) - As Election Day nears, a key question confronting
investors is how each presidential candidate will affect the stock market.
At no other time in U.S. history is such a question so pertinent, with about
half of all households owning equities.
In this article, CBS.MarketWatch.com identifies sectors that will get a boost
under an Al Gore presidency. On Wednesday, we'll examine the impact if George
W. Bush wins. See our full election coverage.

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CBS MarketWatch Columns
Updated:
10/31/2000 9:37:46 AM?ET

First, a caveat: Despite the campaign rhetoric, analysts said, a president
has less direct impact on the stock market than do the economic cycle, the
stock market cycle, the oil cartel, the global economy, the strength of the
U.S. dollar, interest rates and many other influences.
As such, giving any administration sole or main credit for a bull or bear
market would be misleading.
Where the government has greater influence is in such things as military
spending and, more critically, the choice of Fed chairman, said Arnold
Kaufman, editor of the S&P Outlook, an investment publication published by
Standard & Poor's.
Investors also should remember that campaign promises don't always work out.
That said, analysts have identified sectors that either could benefit under
Gore, or that historically have done well under Democrats.
Capital goods
If Democrats live up to their "big spender" image, Kaufman said, expect a
rise in infrastructure spending. That means an impact on the communications
and transportation, among other sectors.
His favorite stocks here include Sanmina Corp. (SANM: news, msgs), a maker of
electronic components for equipment makers, and Tyco (TYC: news, msgs), a
diversified electronics and industrial company.
Sanmina makes electronic components and cables for equipment manufacturers in
the communications, industrial, medical and high-speed computer markets.
Last week, Merrill Lynch chose Sanmina as one of top 10 tech stocks that are
expected to outperform in the next six to 12 months.
In the fourth quarter, Sanmina's earnings before one-time charges more than
doubled from the like period in 1999, beating Wall Street's consensus
estimate by 10 cents. Revenue almost doubled to $1.27 billion. Company
profile, latest financials, and analysts' ratings.
Tyco sells to the telecommunications, electronics, health-care, industrial
goods and fire and security services markets. Tyco recently completed the
acquisition of Mallinckrodt, a specialty medical products maker, boosting its
position in the respiratory care arena.
Fourth-quarter earnings before extraordinary items rose by 40 percent to $1.1
billion, or 64 cents a share, from a year ago. Sales went up by 25 percent to
$7.8 billion. Company profile, latest financials, and analysts' ratings.
Earlier this month, Legg Mason raised its rating on Tyco to "buy" from
"market performance." Elizabeth Mackay, chief investment strategist at Bear
Stearns, includes Tyco on her recommended list.
Mortgage lenders
A Gore presidency could end an action by some lawmakers to sever these
lenders' lines of credit from the U.S. Treasury, said Erik Gustafson, senior
portfolio manager for Liberty Growth Stock fund.
The argument for severance is that these congressionally chartered lenders
have an unfair advantage over other banking and mortgage lenders. In
addition, the SEC's new fair disclosure regulation can be expected to boost
companies with reliable earnings growth, according to Bear Stearns. Stocks
expected to do well in this environment include Fannie Mae (FNM: news, msgs)
and Freddie Mac (FRE: news, msgs), Bear Stearns said.
Fannie Mae, or the Federal National Mortgage Association, and Freddie Mac,
the Federal Home Loan Mortgage Corp., buy conventional home mortgages from
banks and mortgage bankers and sells them as securities. Fannie Mae: Company
profile, latest financials, and analysts' ratings. Freddie Mac: Company
profile, latest financials, and analysts' ratings.
Health care providers
An increase in government spending on Medicare should boost stocks in this
sector. Warren Isabelle, president of Ironwood Capital Management, likes
nursing home operator Beverly Enterprises (BEV: news, msgs).
Last week, ING Barings raised its rating on Beverly Enterprises to "buy" from
"hold." Beverly Enterprises recently reported a second-quarter profit,
reversing a loss from 1999. The company's business is improving because of
increased revenue from Medicare and Medicaid. However, Beverly has taken a
hit lately because it's adding $50 million to its reserves for patient
liability costs for 2000.
Alternative energy sources
In his book, "Earth in the Balance," Gore called for the gradual elimination
of the internal combustion engine and espoused other environmental beliefs.
As such, alternative energy stocks should do well under his presidency,
specifically fuel cell companies, said Jim Lowell, chief portfolio strategist
for Adviser Investments Management.
One stock he likes is FuelCell Energy (FCEL: news, msgs). FuelCell develops
electrochemical technologies that generate electricity without combustion.
Last week, Friedman Billings Ramsey raised its rating on Fuelcell to
"accumulate," following Chase H&Q's upgrade to "buy" earlier in the month.
FuelCell also has allied with Enron (ENE: news, msgs) to develop and sell
FuelCell's Direct FuelCel products. Enron has invested $5 million in the
company. Company profile, latest financials, analysts' ratings.
What about tech stocks?
Here, analysts have mixed feelings. Kaufman believes both candidates would be
good for the sector in general, but Gustafson disagrees, citing the worsening
of the regulatory environment in the last eight years and the antitrust
action against Microsoft (MSFT: news, msgs). Lowell thinks Gore's impact
would be neutral to negative, but analyst Safa Rashtchy of US Bancorp Piper
Jaffray said the Democrat could be good for Net stocks.
Gore vs. Bush portfolios
Thus far, Gore is ahead of Bush, based on a basket of stocks pegged to each
candidate's possible presidency. Since Sept. 1, Lisa Kammert, an analyst at
Birinyi Associates, has been tracking two portfolios comprising 12 stocks
each that would do well under Gore or Bush. As of Monday, Gore's portfolio
has outperformed Bush's by 4.43 percent, based on a simple average of each
stock's return. In 1992, the same model accurately predicted a Clinton win.
In the Gore portfolio are Amazon.com, Yahoo, Citigroup, Bank of America,
Disney, Time Warner, BellSouth, Duke Energy, Tenet Healthcare, Procter &
Gamble, Coca-Cola and Waste Management. In Bush's basket are IBM, Microsoft,
Exxon Mobil, Transocean Sedco, Merrill Lynch, Bristol Myers, W.R. Grace,
Beazer Homes, Philip Morris and Boeing. Going into the last week before the
election, Gore has outpaced Bush most of the time since Sept. 1.
As for job growth, a study by executive recruiter Challenger, Gray &
Christmas indicates that a Gore administration would boost employment for the
mass transit sector, education, health care, construction (homes and
schools), agriculture, lawyers, insurance, law enforcement, commercial
banking and forestry.?