With the election nearly on top of us, ideas for investing based on the outcome are everywhere.
Many anticipate that a Romney presidency would mean a stronger dollar, falling bond prices, lower commodity prices, higher defense spending and either weakness in financial stocks (because of higher interest rates) or strength in financial stocks (because of lower regulation).
A second term for Obama, on the other hand, could be a boon to healthcare stocks (as Obamacare is implemented and uncertainty removed), gold prices and home sales, which benefit directly from low interest rates.
Or, the opposite could happen. Promises made on the campaign trail are far from certainties, and the President can rarely do everything he wants to do anyway.
So the smart thing to do at this point might be to buy stocks that don’t care who wins the election. Think of companies that provide necessary goods and services, or generate a large part of their revenue internationally, or have long-term fixed-price contracts.
I’ve found three of them for you today.
The first is a reliable dividend-paying utility from Kansas. The company’s long-term uptrend is remarkably steady, and the company also increases its dividends frequently, as you can see in the chart below.
Here’s the recommendation of the stock from Richard C. Young’s Intelligence Report, via the latest Dividend Digest:
“Westar Energy, Inc. (WR) is a staid mid-western utility. It provides electric service to 688,000 customers in the great state of Kansas. The utility owns 6,300 miles of transmission lines and 7,100 MW of generating capacity. Westar will never win the award for most fascinating company, but the company pays you a 4.50% yield for sticking around. Buy.”—Richard C. Young, Richard C. Young’s Intelligence Report, October 2012
My second idea might be especially tempting today, right after Hurricane Sandy has reminded us all of the power of extreme weather. Compass Minerals International, Inc. (CMP), a major U.S. miner and distributor of de-icing salt, was recommended in the latest Dividend Digest by Andrew Snyder, editor of Unconventional Wealth. As he wrote in his recommendation, the market for road salt is almost entirely uncorrelated to the economy, or to who’s occupying the White House:
“When it snows, does your local municipality have the luxury of cutting back on the amount of salt it puts on the roads? If prices are too high, can it tell its citizens to toughen up and drive smarter? No, of course not. That’s why, each year, we spread more than 11 million tons of salt on our roads—no matter the price. And the more roads we build and the faster we drive, the more salt we spread. That’s what gives Compass Minerals such a strong business model and what makes it so attractive in turbulent times.
“With annual North American salt sales averaging 7.6 million tons over the last decade, the company is a dominator in an industry that is almost entirely removed from the ebb and flow of the overall economy. [And] shares of Compass have virtually no relation to the overall market. In my search for the perfect asset to free us from the trouble ahead, I used a correlation analysis to compare the company’s long-term share price to the movements of the S&P 500. The correlation coefficient of Compass is -0.024.
“[A warm winter on the East Coast last year means] salt stockpiles in Compass’ key sales area are high. The company says some customers that normally take their first seasonal deliveries in the third quarter won’t have to buy fresh salt until the fourth quarter. But here’s the thing with that piece of news: it’s old news. In other words, the market has already discounted the news and moved the share price accordingly. … Buy shares of Compass Minerals under $82.50.”—Andrew Snyder, Unconventional Wealth, October 2012
Of course, we could have a second mild Northeast winter in a row, which would be negative for Compass Minerals and CMP. But the stock pays you a decent 2.3% dividend for holding on, and it won’t be affected by who comes out on top on Tuesday.
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Finally, my third idea is a household name with two apolitical characteristics: its products are mostly consumer staples, fairly isolated from consumer whims, and it has a large international division. The stock was actually recommended by two experts in our latest Dividend Digest; here’s the recommendation from one of them, The Primary Trend’s Barry Arnold:
“Campbell Soup Company (CPB) reported fourth-quarter (fiscal year-end 7/31) EPS of $0.41, beating Wall Street estimates of $0.38 per share. Revenues came in flat at $1.6 billion, but surprisingly, the often-criticized U.S. soup segment increased by 9%. CPB management gave earnings guidance of $2.51-$2.57 for fiscal 2013, just short of our $2.60 estimate. Technically, CPB common stock has kept pace with the stock market off of the June lows, with a gain of 13%. The stock is attempting to break out of its base in the $30-$35 zone. Any pullbacks below $35 should be used to accumulate what we believe to be a solid, long-term investment with an above-average dividend yield. Buy CPB common under $35.”—Barry Arnold, The Primary Trend, September 7, 2012
CPB is currently yielding about 3.3%, decent for a stock with good long-term growth potential. One exception to the apolitical theme of this investment is that a change in the value of the dollar would cause exchange-rate fluctuations affecting revenues from Campbell’s international business, but I still think the global growth aspect is a more important factor. (Also, the company uses cross-currency swaps and other foreign exchange contracts to mitigate exchange-rate risk.)
Now, let’s get this election over with!
Wishing you success in your investing and beyond,
Chloe Lutts
Editor of Dick Davis Dividend Digest
