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An Election Boost for (Some) ETFs?

It should come as no surprise that certain companies and industries stand to gain if certain presidential candidates win. After all, many are quick to point out how well oil companies have done under the current administration. Look at these market-trouncing gains for ExxonMobil (NYSE: XOM  ) , for example:

  • 2003: 21%
  • 2004: 28%
  • 2005: 12%
  • 2006: 39%
  • 2007: 24%

Believe it or not, those returns actually lagged much of the rest of the industry!

So, how might election results in November affect various investments? At seekingalpha.com, Gary Gordon focused on one particular candidate, picking out some "Obama-friendly" ETFs. (ETFs, or exchange-traded funds, combine features of individual stocks and index funds. Read all about them and how they offer some valuable advantages over traditional mutual funds in our ETF Center.)

For starters, given Obama's interest in alternative energy, it was suggested that ETFs focusing on the sector, such as the Market Vectors Alternative Energy ETF and the Powershares Global Clean Energy Fund, might fare well. The former contains stocks such as First Solar (Nasdaq: FSLR  ) and Suntech Power (NYSE: STP  ) , while the latter is invested in the likes of Cree and MEMC Electronic Materials (NYSE: WFR  ) .

This is just the tip of the iceberg. Spend a little time reading and thinking about the candidates' positions on lots of issues, and you'll likely see a lot of possible opportunity -- or danger, depending on your holdings. For example, there's a lot of talk about overhauling our medical system and providing more health-care coverage for more Americans. This results in a lot of uncertainty for pharmaceutical companies like Merck (NYSE: MRK  ) and Pfizer (NYSE: PFE  ) , as well as other companies that deal with health care. Despite the confidence we might have in continued sales growth for such enterprises, future profit margins suddenly seem less clear.

In another direction, think about the war in Iraq. Decisions made at the top levels of government can have a big impact on defense contractors like Lockheed Martin (NYSE: LMT  ) .

There's money to be made, if you can tell which way the wind is blowing. But political considerations are just one thing you have to take into account when looking for long-term winning investments, although they're definitely important to keep in mind.


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Selena Maranjian
TMFSelena

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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Related Tickers

9/19/2014 4:05 PM
LMT $180.74 Up +1.17 +0.65%
Lockheed Martin Co… CAPS Rating: ***
MRK $60.49 Up +0.18 +0.30%
Merck & Co., Inc. CAPS Rating: ***
PFE $30.40 Down -0.18 -0.59%
Pfizer CAPS Rating: ****
STPFQ $0.28 Down +0.00 +0.00%
Suntech Power Hold… CAPS Rating: **
SUNE $20.40 Down -0.39 -1.88%
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XOM $97.12 Up +0.51 +0.53%
ExxonMobil Corp CAPS Rating: ****

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