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2010-01-19 01:05

WALL STREET ROOTING FOR MAIN STREET

The market is edging higher today mostly on the buzz being created in Massachusetts and the battle for the late Ted Kennedy's Senate seat. Wall Street is clamoring for less government intervention and more free market focus, but thought it would have to wait until later this year. I think that the White House felt the same way as it botched its healthcare reform by first allowing it to be crafted by Nancy Pelosi and Harry Reid and then dismissed it out of hand amid public resentment. If polls are correct then the White House will find itself embroiled in an effort to unfairly stop Scott Brown from taking office. I would say that if the White House read my work maybe they could have avoided all of this, but the fact is that the Administration will be defiant to the end. Moreover, watching the Sunday talk shows, it's clear that the Democrats and their backers in the media continue to dismiss Main Street's opinion. Scott Brown winners Health Insurers: This goes without saying but insurance companies are poised to benefit from a watered down healthcare bill without a public option. Of course, they would benefit more if they only had to deal with the forces of the free market and not the invisible hand of a repressive government. Wellpoint (WLP) I think is the best play in the group; it has beaten the Street's earnings estimates in each of the last three quarters, trades at just 1.4 times book value, and FY10 earnings consensus has edged higher to $6.12 per share from $6.03 per share. Drug Companies: In the new world of government picking winners, it's apparent that this Administration digs biotechs and hates (chemical) drug makers. There were talks of shortening the patent exclusivity period for drugs. In this space, Merck (MRK) stands out as it has beaten the Street's earnings estimates in three out of the last four quarters, and earnings estimates are climbing for FY10. The company's pipeline boasts 6 ANDA, 16 Phase III, and 30 Phase II drugs. Natural Gas: Not only could the election derail Cap n Trade (a tax on every American) but could slow the ambitious plans of the EPA, which is considering slowing the use of "fracing." This would severely damage the revitalized natural gas space. My favorite in this space is Chesapeake (CHK), which has a big project in New York on the Marcellus Shale along with others. Trucks: It's one thing to talk "green" but the only way to make "green" is to have what American drivers desire, and that's trucks. So, General Motors' lineup of vehicles is full of them. Scott Brown has over 200,000 miles on his GM truck. SAM: It stands to reason that people in Massachusetts will be downing much beer this week, most will be toasting while others crying in it. The big winner should be Boston Beer (SAM). The stock is already up big but has much more room on the upside and at some point should be acquired. The company has been executing well, and its FY10 earnings estimates are surging. They now stand at $2.47 per share from $1.99 per share a few weeks ago. The Market There is a fair amount of angst beyond political implications as the stock market still appears to lack that oomph. The good news is that the bias is slightly to the upside, but the bad news is no theme has emerged yet to spark/justify the next leg of the rally. The market is waiting, however.

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Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security.