By Robert Powell, MarketWatch
BOSTON (MarketWatch) — Wayne Gretzky was one of the world’s greatest hockey players partly because he knew where the puck was going. President Barack Obama this week gave ordinary folks a chance to become great investors by telling them where the money will be flowing.
In his State of the Union address, Obama said the U.S. will invest in electric cars, high-speed trains, high-speed Internet, clean energy, education, and biotechnology, to name but some of the big-picture items where investment opportunities will surface over the next two decades. Read more about Obama's State of the Union address.
Energy
One of the key areas of relevance to investors is energy, where formulating a policy that will reduce the country's dependence on foreign oil will involve more spending in alternative energy, nuclear and coal, said John Praveen, chief investment strategist of Prudential International Investments Advisers.
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Jeremy Zirin, chief equity strategist at UBS Wealth Management Research, agreed, saying that “greater government subsidies for alternative-energy production could be a positive for solar, wind and hydro-generating companies.”
At the sector and industry level, Zirin said policy efforts to both reduce emissions of pollutants from existing fuel sources and promote energy efficiency should be positives for the industrials and technology sectors.
“Within industrials, large-scale investments by electric utilities to either retrofit coal-fired plants or shift production to cleaner gas or nuclear production should benefit engineering and construction companies,” Zirin said.
David Carter, chief investment officer of Lenox Advisors, suggested investors might want to approach investing in clean- and alternative-energy companies as if they were venture capitalists. There is a lot of technology and business risk associated with the companies in this sector, he said. “You should invest in ETFs because many [companies] will fail and one or two will succeed and we don’t know which ones will work out,” he said.
Morningstar Analyst Abraham Bailin noted in a recent report that Claymore Global Solar Energy /zigman2/quotes/210041821/composite TAN -6.04% is the ETF vehicle of choice for investing in the solar-energy sector. In that same report, he also noted that PowerShares Global Clean Energy /zigman2/quotes/202774103/composite PBD -5.98% and Market Vectors Global Alternative Energy both provide “broader coverage of the entire alternative-energy space with a much higher level of market liquidity.”
Infrastructure
An increase in spending on infrastructure and science will not only improve the longer term competitiveness of the U.S. manufacturing industry but could also potentially boost the industrial sector in the near to medium term, said Prudential’s Praveen.
“Increased infrastructure spending in roads, railways and runways would be positives for construction-services companies and for the materials sector,” Praveen said.
Morningstar’s top-rated companies in the materials sector include Vulcan Materials Company /zigman2/quotes/203479463/composite VMC -2.97% and China Gerui Advance Materials Group . Another possibility is Caterpillar, Inc. /zigman2/quotes/203434128/composite CAT -3.51% .
Praveen also said any initiatives that stimulate the labor market, lead to improvement in job creation and reduce unemployment will be a positive for consumer spending and the consumer sectors.
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