By David Hill - 11/18/09 01:05 AM EST
One of the most basic things to consider is the nature of the company’s lines of business. Is the company in an industry that is thriving and has upward potential? Does the company possess any particular strengths that allow it to defy or overcome inherent weaknesses of its industry? Obama is in the “direction of the country” business, and that’s a tough industry these days. Though his successful entry into the marketplace allowed him to separate himself from “wrong-track” trends, he has suddenly found himself back running with the pack, not any different from, say, a run-of-the-mill auto manufacturer without a “cash for clunkers” lifeline. This basic yardstick says he’s Chrysler and you should sell.
Trend analysis is not good either, but there are opportunities. The company’s book value is declining steadily. There’s almost never any news that causes anything more than a short-lived uptick in Obama’s job approval rating. The administration definitely needs a game-changer. Perhaps passage of a healthcare plan will provide this significant reversal of fortune. But a host of other issues that lie ahead might undo any healthcare bump. Whatever the president does in the Middle East is likely to result in bad news. It’s a no-win situation. The administration also appears ready to re-enter the immigration reform market. That’s another impossible situation. And the most important factor is where the uncertain economy is headed. So while the trends do not recommend buying Obama, if you already own the stock, you should probably hold onto it, at least until the healthcare situation resolves. If it ever looks like healthcare isn’t going to happen, sell quickly.
The company’s intangible assets and good will are better than its performance. People who once liked Obama still generally hold favorable impressions of him, even if they have soured on his policies. If you are looking for a rationale to hold or even buy this stock, this is one of the best.
The biggest sign that ordinary investors should sell the stock is recent insider trading. Democrats and liberals, even, are starting to pick at the president. The op-ed pages, talking heads and blogger tweets have changed noticeably in tone and content. Some of this is policy-based. Liberals don’t like that Obama has dawdled on gay-rights issues and withdrawal from Guantánamo or Iraq while expanding conflict in Afghanistan. Meanwhile, even independent-minded pundits and soft Republicans are getting antsy. The ever-genteel Republican Peggy Noonan, who has bent over backward to be conciliatory toward the new administration, is viscerally more strident in her comments on Obama. The blunt fact is that no insiders are buying Obama’s stock and most are selling. So should you.
Hill is a member of the research faculty at Auburn University and has been a Republican pollster since 1984.