After a nail-biting election, the results came in last night
and America has decided to give four more years to President
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
that the investors can use to gain exposure to those sectors.
Excellent ETFs With More than 4% Yield
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 tracks the Health Care Select Sector SPDR Index, which
includes companies mainly from the pharmaceuticals, healthcare
providers and services and healthcare equipment and supplies
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
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
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 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
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
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
PowerShares Cleantech Portfolio (
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
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.
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
Vanguard Telecom ETF (
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
SPDR-HLTH CR (XLV): ETF Research Reports
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