Let's face it: So far, all that newfound hope hasn't extended to the stock market.
Since Election Day, the S&P 500 is off another 16.5 percent, with the Dow shedding more than 14 percent as economic weakness and questions over the government's bailout continue to weigh on already battered share prices. Still, if you're looking for stocks getting some post-election attention, there are a few out there that could get a boost—intentionally or not—from the coming Obama presidency. One word of caution: As always, when an investor is considering stocks, the current occupant of the White House matters less than company fundamentals. With that in mind, here's a look at four of those names, plus one for veep-in-waiting Joe Biden.
1. Chesapeake Energy
The Obama administration could look favorably upon getting natural gas on the road in American automobiles. Advocates like billionaire oilman T. Boone Pickens (who, admittedly, has had a rough few months) and Chesapeake's CEO, Aubrey McClendon, may have a friend in Rahm Emanuel, Obama's new chief of staff. The New York Times points to legislation (PDF) proposed by Emanuel to spur natural-gas-powered vehicles and infrastructure. Plus, the Oklahoma City-based driller's stock price has been hurt by the slump in natural gas prices, and with a price-earnings ratio below 10, it's being touted by some value investors as well. (In fact, Chesapeake (ticker symbol CHK) has a lot going on at the moment, including rumors of a possible tie-up with BP.)
2. Energy Conversion Devices
Aside from natural gas shares, "green" stocks could have their most friendly president ever. Still, the shaky global economy has knocked the sector down a few pegs this year. Solar shares keep falling as fears mount of slower demand and an oversupply of panels on the market. So it pays to be selective: A growing chorus of backers for the thin-film solar product maker Energy Conversion Devices (ENER) contends the company will hold up better than much of the industry, even though its shares have slumped lately along with those of its peers. Zachs says the stock is a speculative buy with a $47 price target, and it is "optimistic" about its long-term potential as solar activity increases and the benefits of the now-extended residential solar investment tax credit appear. Deutsche Bank values the stock at $41, or 17 times calendar 2009 earnings of $2.48 per share. Energy Conversion trades near $23 today.
We touched on the outlook for defense plays before the election when analysts were betting old-line military firms would get a boost from a McCain win while high-tech names would benefit from an Obama victory. Now that November 4 has passed, shares of unmanned vehicle maker AeroVironment (AVAV) are still going strong. The company is seeing earnings growth of close to 20 percent year over year and has an order backlog of more than $700 million. While some analysts worry that lower defense spending coupled with possible troop drawdowns next year could hurt some of AeroVironment's business, its shares are up more than 20 percent so far this year—a nearly unparalleled feat among its competitors (or anyone else in 2008). Even if fewer "boots on the ground" in spots like Iraq hurt sales, analysts note that estimates on revenue from servicing the aerial vehicles already in use could add some extra lift. Friedman Billings Ramsey analysts say use of the firm's Raven vehicle is "exploding" and usage by the Army in 2008 is "on pace to double to 300,000 flight hours." That means revenue from servicing existing vehicles could be higher than current expectations.
4. Smith & Wesson
That's right. Gun enthusiasts are apparently worried the new Democratic majority is getting set to restrict their right to own weapons—and that means they're stocking up. Take a look at this Dallas Morning News piece, or this CNN story quoting a Virginia gun owner buying a .45-caliber pistol to "hedge my bets." Wall Street is taking cautious notice. In October, Stephens Inc. noted that "channel checks suggest that hunting sales are slowing even further than before, but small handguns, semi autos, and military-style rifles are expected to pick up" before more liberal politicians take office. Earlier this month, Merriman Curhan Ford upgraded Smith & Wesson (SWHC) to a "buy" with a price target of $4 to $5. Even if you don't think the above is enough to turn bullish (and a run by panicked gun buyers admittedly should be viewed with caution as a case for investing), S&W might be worth keeping an eye on as a longer-term holding. Deutsche Bank recently initiated coverage on the stock with a "hold" rating, saying that in a more normal consumer environment, earnings could grow at a 20 percent-plus annual rate, thanks to market share gains, military and law enforcement contracts, and manufacturing efficiencies.