Regardless Of Election Results, Bloomberg And Goldman Sachs Say Buy Stocks Linked To Federal Spending

Donald Trump and Hillary Clinton both believe the U.S. government needs to spend more on infrastructure related projects. As such, stocks linked to government spending could stand to benefit, according to a report by Bloomberg, citing analysts at Goldman Sachs.

Clinton has called for an investment of $275 billion over five years to improve the country's infrastructure. Trump hasn't provided a specific figure but did say that Clinton's spending plan is "not nearly enough."

Goldman Sachs pointed out that there are several companies across various sectors such as aerospace, defense, industrial manufacturers and managed-care providers that derive more than 20 percent of sales from the U.S. government. As an added bonus, many of these companies are cheaper than the broader market relative to earnings.

"Increased government spending appears to be the most likely policy outcome from either a Clinton or Trump presidency," Bloomberg quoted Ben Snider, an equity strategist at Goldman Sachs, as saying in a research note. "Regardless of who wins, companies leveraged to fiscal expansion should benefit."

Related Link: As The Election Draws Near, "Divorce Politics From Your Portfolio"

The analysts singled out Lockheed Martin Corporation LMT and Huntington Ingalls Industries Inc HII as two defense-related firms that derive 99 percent of their revenue from government spending. As a whole, the aerospace and defense sector is undervalued as an index of stocks within the S&P 500 are trading at 17 times profit, 15 percent below the broader benchmark's valuation.

"Just given the state of the world, it could be a relatively attractive area, not just right after the election but for the next several years, no matter which party is in power," John Carey, a Boston-based fund manager at Pioneer Investment Management told Bloomberg. "It's a good jobs provider as well, which could be helpful for the economy."

Other companies the analysts singled out include Molina Healthcare, Inc. MOH and WellCare Health Plans, Inc. WCG, two managed care service providers that derive 100 percent of their revenue from the U.S. government.

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