After a nail-biting election, the results came in last night and
America has decided to give four more years to President Obama.
Overall this should be positive for the market as the investors
like visibility but there are some sectors that will flourish more
than the others during President Obama’s second term. It would thus
be prudent for the investors to tilt their portfolios towards those
sectors.
Below we look at some of the sectors that are poised to benefit
from Obama’s re-election and the related ETFs that the investors
can use to gain exposure to those sectors. (Read: 3 Excellent ETFs
With More than 4% Yield)
Healthcare
Healthcare sector will benefit since president's Affordable
Care Act will increase the healthcare spending. Further, hospitals
will no longer have to spend substantial money on providing
emergency care to the uninsured. Overall the healthcare providers,
service companies and the pharmaceuticals companies stand to
benefit.
Health Care Select Sector SPDR Fund
(XLV)
XLV tracks the Health Care Select Sector SPDR Index, which
includes companies mainly from the pharmaceuticals, healthcare
providers and services and healthcare equipment and supplies
industries.
The ETF has more than $5.5 billion in assets and trades in heavy
volumes. It is however slightly top-heavy with top 10 holdings
accounting for more than 60% of the assets.
XLV charges a low expense ratio of 18 basis points while it pays
out an attractive dividend yield of 1.93%. (Read: 3 ETFs To Prepare
For The Fiscal Cliff)
Homebuilders
Obama administration will likely be favorable for the
homebuilders as it will continue to work towards helping the
delinquent homeowners refinance into lower mortgage rates.
If the current inventory of the foreclosed homes decreases there
would be greater demand for new homes and price appreciation.
Further while Republicans have been very critical of the Fed’s
ultra-low interest rate policy, Obama administration will continue
its support for the Fed and the chairman Ben Bernanke. Fed’s QE3
program as well as the near-zero interest rate policy will support
the housing market.
Shares Dow Jones US Home Construction Index Fund
(ITB)
ITB tracks the Dow Jones U.S. Select Home Construction Index,
which measures the performance of the home construction sector of
the U.S. equity market. Initialed in May 2006, the fund now
has more than $1.5 billion in assets, which are invested in 28
holdings.
Top three holdings are DR Horton (9.56%), Lennar (9.56%) and
Pulte Group (8.99%). The fund is heavily exposed to the Home
Construction sector (64.3%), followed by Building Materials &
Fixtures (17.6%) and Home Improvement Retailers (13.3%).
The ETF charges 47 basis points in annual expenses and currently
pays out a yield of 0.35%. We may add that this ETF has been
unstoppable (up 78% ytd) since there were clear signs of housing
bottoming out. But with rebuilding required as an aftermath of
Sandy and Obama’s re-election, this ETF may continue its run in the
longer-term as well. (Read: Three ETFs to Watch in Hurricane
Sandy's Aftermath)
Clean Energy
President Obama supports a green-energy agenda and has
reiterated his support for “development of cleaner and more
energy-efficient technology”. His administration wants to extend
the tax credits for clean energy companies that are set to expire
at the end of this year.
Obama has spoken several times about his commitment to tackle
the issue of climate change and to protect the environment. In his
convention speech, the President reiterated commitment towards
continued investment in clean coal, as well as wind and solar
energy.
PowerShares Cleantech Portfolio
(PZD)
PZD tracks the Cleantech Index and invests at least 90% of its
total assets in stocks of cleantech companies, from a broad range
of industry sectors. The ETF is well diversified with 60 holdings,
with the top holdings constituting less than 30% of total
assets.
PZD charges 67 basis points to the investors for annual expenses
and currently pays out a decent yield of 1.67%. Launched in October
2006, the fund has so far attracted $68.2 million in assets under
management.
Telecom
Obama has been advocating broadband expansion and he had
recently signed an executive order making broadband construction
faster and cheaper. Earlier he had launched the National Broadband
Plan, with a goal of achieving 90% broadband adoption across
America by 2020.
While his administration had failed to meet some of the interim
goals for the project earlier, there may be a greater push towards
achieving the goals during his second term as the President.
Vanguard Telecom ETF
(VOX)
VOX seeks to replicate the price and performance of the MSCI US
Investable Market Telecommunication Services 25/50 Index.
With holdings of 35 stocks and AUM of $503.4 million, the
product allocates the majority of its assets (nearly 71%) to the
top 10 firms. AT&T, Verizon and Sprint Nextel (S) take the top
spots in the basket and make up for a combined 50% share.
The ETF is the low cost choice in the telecom space with an
expense ratio of 0.19% and tight bid-ask spreads. Further,
the fund generated excellent returns of 15.4% year-to-date and has
a solid dividend yield of 2.79%.
ISHARS-DJ HO CO (ITB): ETF Research Reports
PWRSH-CLEANTECH (PZD): ETF Research Reports
VIPERS-TELE SVC (VOX): ETF Research Reports
(ZLV): ETF Research Reports
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