Investing in Your Backyard: Washington, D.C.

Break out the whistlers and cherry bombs -- it's a Fourth of July investing party in the nation's capital!

There are many good reasons for researching investment opportunities in a certain geographic area. This time, it's the greater Washington, D.C., metro area. Home to all three branches of the government for the last 200 years, there's plenty of business to go with the politics.

If you happen to live in Chevy Chase or on the Hill, or in Old Town Alexandria, you already have a few advantages when it comes to evaluating the local market, such as access to local news sources and the word on the street, and a high probability of being a customer or employee of these companies. And if you're not a local resident, you might still want to know whether the weather matches the business climate -- a hot area could be chock-full of undiscovered treasures on their way to greatness.

Without further ado, here are the largest companies headquartered in the capital city and environs:

Oh dear -- we're not off to a nice, positive start to this party. The biggest cats in town are not held in high esteem by our Motley Fool CAPS players today.

Freddie and Fannie look like the Terrible Twins in the light of CAPS. Your fellow investors have chimed in with sector concerns for both, especially consumer-mortgage specialist Freddie. The housing slump has continued, after all, and nobody knows where the bottom may be. Nevertheless, Fannie Mae is a Motley Fool Inside Value pick, and deep-discount director Philip Durell still liked the stock in a March update for newsletter subscribers -- at least at the depressed prices of that time. The share price has gone up more than 24% since then, though.

For Sprint, it's not a weak sector that brings the bile out, but the word on Main Street is that this is a worst-of-breed company. A lack of customer service, high prices, and perhaps the least reliable cell phone network in the industry are concerns that show up repeatedly in CAPS player comments, and it's enough to make a seasoned Fool shudder. Let's move on to the fireworks.

... By the dawn's early light!
Take for example Hidden Gems recommendation Blackboard (NASDAQ:BBBB) and its four jaunty stars. CAPS commentators talk about a "virtual monopoly" on the very narrowly defined market for Blackboard's educational management software. Its only serious competition is the Moodle developer community, an open-source project available free of charge, but with a more nebulous support system and no corporate backing.

Or how about phone system interchange operator NeuStar (NYSE:NSR)? Five stars and a truly unique market position are backed up by years of stable financial growth and a modest valuation.

You have to wonder whether near-monopolies like these two shooting stars chose to headquarter near the Capitol just to have easy lobbying access to our policy-makers. Or maybe they just like the free admission at the Smithsonian museums.

Both are certainly valid reasons to take up residence along the Potomac, but easy access to Congress is no guarantee of market success -- or respect for that matter. The 66 tickers based in the D.C. area score a measly 2.7 CAPS stars on average, with a single star being the most common rating.

As for newsletter picks, you'd think that our Foolish analysts might pick plenty of cherries from their own backyard; Fool headquarters are in Alexandria, just a couple of Metro stops from the Capitol or the White House, and smack in the middle of an intense financial neighborhood. But there are just three active picks in the area -- Blackboard, Fannie Mae, and Stock Advisor recommendation Corporate Executive Board (NASDAQ:EXBD).

Wet powder?
So there's not much here to attract the roving eyes of our top market masters. And it's hard to pin a specialty on the Beltway, like high-tech in Austin or manufacturing in Cleveland. The businesses here go from infection control specialists to server systems builders, passing through major banks, information management experts, newspaper publishers, and human resources specialists.

That makes Washington more interesting to generalists than to sector-focused investors. Proximity to the nation's capital is certainly a draw for all kinds of industries looking to get an edge through lobbying and legislation.

But all in all, I give the District an "eh," and am moving on to my next target. The fireworks fizzled.

Do you agree? Disagree? Feel free to weigh in on the D.C. market -- or on any stocks at all, really -- by joining Motley Fool CAPS and blasting away with your ratings and commentary pitches. And if neither Gaithersburg nor Dupont Circle is your 'hood, maybe we'll come around where you live next time.

Further Foolishness:

• Blackboard's Lessons in Monopolism
• A Subprime Fix From Fannie and Freddie
• Kiss Up to SatRad, Win a Prize

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, or follow him around the world on these Foolish local-business treks. Foolish disclosure is always red-hot.