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During market rebounds, small-cap stocks tend to soar faster and farther than the broader market — turning hardworking folks like you and me into millionaires over time. Want some proof?
Top 2 Stocks For Cashing In On Obama’s Stimulus Plan
While the politics behind President Obama’s stimulus plan are debatable…
The potential for making money from this rare $787 billion investment in America is undeniable.
Because unlike the nebulous “bailout plans” that are propping up the U.S. automakers and floundering financial institutions like Citigroup and Bank of America, this stimulus plan isn’t a bailout.
It’s a massive investment that will hand billions of dollars’ worth of projects to healthy, competitive businesses. (Like the companies you’ll discover just ahead…)
And this may be your one-time chance to invest in the companies that could see their revenues soar once the stimulus money rolls in…
But a quick word of warning — not all stocks will go up in the months and years ahead. There will be some big names that never recover from this downturn…
Just as the brutal bear market of 1973-74 sounded the death knell for many darling stocks of the day, like Bethlehem Steel and Johns-Mansville…
At the same time that it set the stage for historic run-ups by a handful of companies like Radio Shack (a gain of 1,557% between 1978 and 1983!) and Wal-Mart (a 1,900% surge from 1973 to 1983!).
The bottom line in all this: You can make a very profitable decision right now. By striking at this rare historical moment, you could build for yourself and your family a comfortable lining of wealth.
Of course, you need an edge. A trusted, independent resource. And that’s where The Motley Fool comes in!
Because while a lot of so-called experts are picking “Obama stocks” that might jump up a little bit in the months ahead…
The Motley Fool’s Inside Value investment advisory service team of researchers dug deeper…
They scoured the world of undervalued stocks… looking for those rare investments that change lives. The stocks that will be talked about decades from now…
And the only stocks that can deliver that kind of long-term performance are the ones with pristine balance sheets and high intrinsic values that sit smack-dab in the slipstream created by a monster trend — the multibillion-dollar trend of Obama’s epic investment in America!
So let’s dive right in… and take a look at the one company that’s in a prime position to cash in on the coming Internet expansion boom…
And take a look at our next investment… it’s a rock-solid company that’s in the sector the U.S. Department of Labor estimates will generate 3 million new jobs by 2016.
And by 2010, Americans will be faithfully handing over $2.6 trillion each year to companies in this industry. Discover how you can profit from this phenomenon…
Overhauling The U.S. Healthcare System
How about a quick quiz to test your healthcare know-how? Pencils, everyone:
1. Approximately what percentage of the U.S. population is uninsured?
1. 1%
2. 5%
3. 15%Answer: C. The Census Bureau estimates that some 46 million Americans were uninsured in 2007.
2. In 2004 (the year for which the most recent data are available), which location had the lowest infant mortality rate?
1. Cuba
2. Detroit, Mich.
3. RussiaAnswer: A. Cuba’s infant mortality rate was 5.8 per 1,000 births, compared with Russia’s 11.5 and Detroit’s 15.5.
3. Which product does Starbucks [Nasdaq: SBUX] spend more money on?
1. Coffee beans
2. Health insurance for employeesAnswer: B.
You don’t have to be a neurosurgeon to realize that something seems awry here. When a nation spends more than $2 trillion a year (roughly 16% of the gross domestic product) on health expenditures yet has a healthcare system ranked 37th in performance in the world, according to the World Health Organization, or when “a doctor… can get more data on the starting third baseman on his fantasy baseball team than on the effectiveness of life-and-death medical procedures” — as stated in a New York Times op-ed — something certainly needs revamping.
To bring America’s health care up to speed, the government is investing more than $140 billion into the sector. Some of the money will update the industry’s technological capabilities, some will fund research, and the remainder will increase Medicare and Medicaid budgets. One company clearly stands to benefit: UnitedHealth Group [NYSE: UNH], the country’s largest provider of health care services.
UnitedHealth operates with four divisions, but the bulk of its business ($75.9 billion, out of $81.2 billion in revenue during 2008) comes from its health care services segment. It provides both fee-based and traditional risk-based coverage to small and midsize companies as well as to families and individuals. Under the fee-based plans, UnitedHealth simply acts as an intermediary, collecting fees for administering the plan and leaving insurers with the potential risks of higher costs. With risk-based coverage, UnitedHealth collects monthly premiums that are ideally 15% to 20% higher than the costs it will pay out in claims.
Government-sponsored health plans like Medicare and Medicaid also fall into this division. For these, UnitedHealth bids on contracts from the government and manages the program with the government’s funds. The size of UnitedHealth’s network gives it a competitive edge when bidding for these plans, meaning it’s likely to receive the bulk of the money coming from the stimulus plan.
And then there’s Obama’s campaign promise of universal health care. Bruce Berkowitz, founder of Fairholme Capital Management and manager of the Fairholme Fund [FAIRX], which owns nearly 1.5% of UnitedHealth’s outstanding shares, believes that if this promise comes to fruition, the government could only accomplish it in one way: by using the managed health care companies, of which UnitedHealth is the largest.
Its current share price more than accounts for the possible risks, meaning we believe there is significant value to be found, with high potential reward. This investment is exactly what the doctor ordered.
Our next company is smack-dab in the momentous effort to rebuild America’s transportation infrastructure. Find out the name of the company that’s in the perfect position to cash in…
Rebuilding America’s Highways
Any driver knows that our roads could use some TLC. But just how bad are they?
According to the American Society of Civil Engineers, more than a quarter of our nation’s bridges “are either structurally deficient or functionally obsolete.” As for our roads, we “spend 4.2 billion hours a year stuck in traffic,” sucking some $78 billion out of our economy. Not only does this cause unnecessary damage to our cars, but these road conditions lead to 14,000 deaths a year.
Over the past two decades, as government spending skyrocketed to historic highs, infrastructure spending has plummeted to record lows.
So to bring our roads up to speed, the stimulus plan is slated to invest nearly $30 billion in our highways and bridges, which alone should help create more than 500,000 new jobs. It should also fuel economic growth because, as Gov. Arnold Schwarzenegger of California recently put it, “The faster we can move people and goods, the stronger our economy is.” Some have estimated that every $1 invested into highways generates $5.40 in economic benefits.
Vulcan Materials [NYSE: VMC] is one company whose products will see a significant spike in demand as our roads are revamped. According to company data, Vulcan is the nation’s largest producer of aggregates (think crushed stone, sand, and gravel), a top-five asphalt producer, and a top-10 concrete producer, operating with a strategically significant coast-to-coast distribution network.
About 20% of the company’s revenue comes from the residential market. Growth here will likely stay slow until the housing market recovers — but the overwhelming majority of Vulcan’s revenue comes from public projects such as highways, so the increased demand in this area should more than compensate for the residential slowdown.
This company has an enormously wide moat, with assets that are not easy to come by, making Vulcan a dominant player in a high-demand industry today. It’s trading more than 40% below our estimated intrinsic value, with a 3.8% dividend — now is as good a time as any to buy stock.
Next up is the smartest way to cash in on the coming “Green Energy” boom. Find out its name and ticker symbol…
The Smart Way to Invest in Green Energy
We’re willing to bet the phrase “energy-independent America” was one of the most-used taglines of both Senator McCain’s and President Obama’s campaigns. But it hasn’t disappeared — it just made an appearance in the economic stimulus plan, with nearly $79 billion allocated to this initiative in the form of tax credits, grants, and dedicated research.
Despite many experts claiming to know whether it will be specifically wind power or biofuels that ignite a green revolution, there is simply too much uncertainty and too many unknown variables to discern which technology will emerge as the most profitable. Not to mention that no green energy company has yet to dig a wide moat — heck, many aren’t even profitable at all.
But that’s not to say you should avoid this emerging sector in its entirety.
Rather, we think that if you want exposure, it makes the most sense to not put all your green eggs in one basket. That’s why we think an inexpensive ETF like PowerShares WilderHill Clean Energy [NYSE: PBW] is the smartest way to go if you want to profit from green technology.
This ETF has positions in roughly 50 clean-energy names with business models ranging from manufacturing green-friendly auto parts to manufacturing solar energy equipment. Most of its positions are in small caps, with the weighted average market capitalization clocking in at just $2.3 billion. Even though the portfolio is relatively diverse, an investment in this ETF will likely be volatile. We certainly wouldn’t recommend overweighting your allocation here, but long term it’s sure to be a winner.
But if all this government spending has you worried about inflation, discover an investment that will help you protect your nest egg…
Inflation-Proof Your Portfolio
The stimulus plan’s passage brings the total price tag of the government’s intervention to an astonishing $9.7 trillion. Two Bloomberg columnists calculated that that’s would be enough to pay off more than 90% of America’s mortgages.
That many dollars added into the economic system, coupled with rock-bottom interest rates, means one thing is certain: Inflation is a-comin’.
Knowing that it’s inevitable, we have one final investment recommendation that will counteract the effect inflation could have on your portfolio over the long term: Vanguard Inflation-Protected Securities [VIPSX].
This mutual fund is a cheap and easy way to get access to Treasury Inflation-Protected Securities, or TIPS as they’re known in the bond world. The principal on TIPS is adjusted upward as inflation rises (likewise, it falls during deflationary periods), so your interest payments similarly rise with inflation (or fall with deflation). With inflation on the horizon, this is a smart way to ensure that a portion of your portfolio will keep up with it. It makes sense to have a significant portion of your bond allocation in TIPS, especially if you’re in or nearing retirement, and this Vanguard fund is the cheapest one out there to help you do so.
What to Do Now
There you have it — our five best ideas for how to profit from this momentous economic stimulus package, all arising from our in-depth analysis and independent research.
Truth be told, the same holds true for all the stocks recommended in Motley Fool Inside Value, the investment advisory service behind our top picks: Sprint Nextel, UnitedHealth Group, and Vulcan Materials.
But it doesn’t have to stop there. The Motley Fool just put the finishing touches on its brand new premium report highlighting the very best small-cap stocks, selected for you by some of the nation’s top independent equity analysts.
Source: fool.com