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. Russia

Answer: 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 employees

Answer: 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

So if you’re looking for ways to accelerate your retirement, here’s how you can move the date of your retirement party up a few years:

1. Add cash.
Yes, it takes money to make money. So the first step in starting and growing your retirement nest egg is finding ways to get more cash into your retirement accounts.

When times are tight, saving more can be a tall order. But you may get some help. If your employer offers a matching contribution to your 401(k) plan, you might double those extra savings. Similarly, Uncle Sam offers benefits in the form of deductions for contributions to 401(k) plans and traditional IRAs, as well as tax credits for low- and middle-income taxpayers who contribute to IRAs.

It takes a little more than $550 per month in savings, earning a 7% return, to get to $1 million over the course of a 35-year career. But if you can add just $100 per month to that — including what your employer puts in and your tax savings — you can cut more than two years off your wait.

2. Embrace stocks.
Saving more is great, but there’s only so much you’ll be able to put aside. You have to make the most of what you have.

People are often too conservative in their retirement investments. Despite the sometimes violent ups and downs of the stock market, the long-term return on stocks far exceeds that of less risky investments like bonds and bank savings accounts. If you have all your money in cash, you won’t lose a penny — but you’re lucky to make 1%-2% right now. Even target funds and other balanced retirement options have sizable portions of their assets in bonds.

A 7% return is a reasonable average for a portfolio that has slightly more in bonds than in stocks. But throughout most of your career, you can afford to take more risk. Owning more stock could raise that return to 9%, lopping off almost five more years from your target.

3. Hit for the fences.
If you only want to match the S&P 500, buying index funds is easy. To get higher returns, however, you’ll have to find stocks that will outperform the index. Here are some examples from the past 20 years:

Those stocks have done particularly well, especially given how badly stocks have done since 2000. But you don’t have to belt all your picks out of the park to retire sooner. If you can eke out just another couple of percentage points on your average return — boosting it to 11% — then that’ll cut another 3 1/2 years off your target.

4. Become a cheapskate.
So far, we’ve only looked at half of the story. How much you spend plays just as important a role in retirement as how much you save. And while many expenses go away when you stop working, new ones quickly take their place — things like travel, entertainment, hobbies, and medical care.

But you have a lot of control over many of these expenses. If it’s worth it to you to spend less in retirement, you won’t have to save as much before you retire. Cutting 10% off your spending means you’ll get to your smaller goal a year earlier.

All in all, combining these four simple tips can let you retire as much as a decade or more sooner than you otherwise would. That thought just might be enough to make even a bad day at work seem brighter.

Source: Fool.com

Investing Lessons from the Poker Table

I hate to disappoint, but I’m not going to stick my neck in the middle of that debate.

But whether we agree that investing and gambling are similar, there are some general ideas from the game of poker that can be adapted quite well for investing. And, heck, if there’s the possibility that it’ll make you a better investor, is it worth fretting about the source?

Lesson 1: You don’t have to play every hand
One of the quickest ways to make your chip stack disappear in poker is to blindly play every hand dealt to you. In a 10-player Texas Hold ‘em game, you’re only forced to bet 20% of the time, and even then they’re only small bets. You can throw away every other hand that’s dealt to you if you want, and it won’t cost you a dime.

But why would you throw away any cards? Well, a two of diamonds and a six of clubs can theoretically become a full house, but you start out with the odds stacked heavily against you when you play a hand like that. Waiting for something like a pair of kings or a queen and jack of spades gives you a much better chance of seeing a return on the money that you’re wagering.

The same holds true for investing. There’s a possibility that CIT Group (NYSE: CIT) could magically avoid bankruptcy and return a bonanza for shareholders. Or Sirius XM Radio (Nasdaq: SIRI) could finally prove the critics wrong, start posting huge profits, and watch its stock fly. But let’s face it, both are long shots, and if you’re looking for solid, predictable returns to build a retirement nest egg, throwing piles of money at either stock is probably not the best idea.

On the flip side, companies like Pfizer (NYSE: PFE) and Honeywell (NYSE: HON) positively ooze predictability and solid returns over the long run. Investing in companies like these — assuming you’re paying a fair price — simply gives shareholders a much higher probability of seeing returns from their investment. And, heck, investors don’t even have to wait for rewards since both currently pay dividends that exceed the yield on 10-year U.S. Treasuries.

Lesson 2: Play your cards right
Kenny Rogers immortalized yet another lesson that we can take from poker when he sang: “You got to know when to hold ‘em / know when to fold ‘em / know when to walk away / and know when to run.”

In both poker and investing, you’re faced with continually changing information. The best poker players and investors are those who not only make the most accurate analysis of the available information, but use that analysis to drive good decision making, whether that’s — in investing — buying, selling, or just sitting tight.

IBM (NYSE: IBM) is a great example of the constantly changing tides that investors can take advantage of. The company had one of the truly great growth stocks in its early years and delivered impressive gains. But not all that long ago it faced some major challenges as the PC market commoditized and its bread-and-butter mainframe market turned into a sleepy niche.

More recently, IBM has found a new life in transitioning to offering higher-margin software and services. Just like recognizing when you have a possible straight flush developing and betting accordingly, investors who figured out what was going on at IBM and invested accordingly have been handsomely rewarded. Over the past five years, its stock has substantially outperformed the S&P index.

Lesson 3: Be choosy with your “all-in” moments
It’s certainly exciting to watch a poker pro push all of his chips into the middle of the table and call “all in.” But it’s important to remember that top-notch players have run through a bunch of mental math to determine that the odds are heavily in their favor when they make a call like that.

Having all of your money invested at all times can be one of the easiest ways to go about investing, but it can also put you at a disadvantage. Not only will you absorb the full brunt of declines such as the one we’ve been living through, but it also leaves you with very little dry powder to invest when stocks do fall. However, with just a little more activity and attention, investors can keep an eye on stock valuations and adjust how much they have invested based on how pricey the market is.

If your all-in moments are restricted to times when the market is trading near or below its long-term average valuation, then you can shift the odds of market-beating returns further in your favor. Fortunately, there are many great tools available for tracking the overall market’s valuation, including my favorite, professor Robert Shiller’s 10-year average P/E spreadsheet.

When it comes to individual stocks, though, the picture is a little bit different. Although elite investors like Berkshire Hathaway’s (NYSE: BRK-A) Warren Buffett can make comments about being willing to go all in on Wells Fargo (NYSE: WFC), most mere mortals are best served by avoiding an all-in call — having their entire portfolio — on a single stock.

Putting away the cards
While having a working knowledge of poker might help bring some of the lessons above to life, you don’t have to ever play a single hand to put them to work. To review, here are three of the investing lessons that we can take from the poker table:

1. Wait for the best investment opportunities — there’s no harm in passing on a stock if you aren’t convinced that it’s a worthwhile investment.
2. Always be on top of new information and be willing to take action when necessary.
3. Going “all in” in your portfolio should be reserved for when market factors are highly attractive.

You can take these three lessons and start putting them to use right now.

Source: Fool.com