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Did Cleantech’s Rally Predict Obama’s Win?

8 November 2012 in Trading Ideas

The results are in and it’s four more years of an Obama administration. Cue the obligatory stories about which business sectors will fare well and which will not under a Democratic president.

For many investors, this attempted parsing is of limited use. Macro-economic factors like a global economic slowdown – or, say, a financial crisis – have the potential to wreak havoc on the market, regardless of policies favored by the Oval Office occupant.

But, sure, based on a candidate’s stated platform, it’s plausible that – all things being equal – investors could be correct in attaching a positive backdrop to certain stock sectors. Blogger Barry Ritholtz did his part before the election with an attempt to single out industries where the two presidential candidates had major differences.

One area where the difference was significant, according to Ritholtz, was energy. As he saw it, a Romney victory would have benefited coal, pipelines, and the exploration and drilling subindustry of the oil sector (although Ritholtz thought Obama has been friendlier to “Big Oil” than his supporters may have expected).

The president, meanwhile, has proven to be much friendlier to wind, solar and electric vehicles.

It’s interesting, then, that a recent resurgence in this “cleantech” sector also seemed to coincide with what has been recognized as President Obama’s comeback in the polls over the past month, which ultimately carried him to re-election.

The Cleantech Everywhere motif is up 1.6% in the past month. The S&P 500, which is representative of the overall broader market, is down 5.4%.

The rise in  the Cleantech motif was also taking place as national and statewide polling data, as examined by number-crunching demigod Nate Silver, was showing Romney at his highest chance of winning on Oct. 13 (38%), only to fall to a longshot projection (9%) by Election Day.

Of course, it’s impossible to tell whether we’re seeing causation, correlation – or luck. What appears more clear is that cleantech industry sectors – lighting, wind, solar, and electric cars – may be showing signs of life after a multiyear beatdown.

For example, the Cleantech Everywhere motif’s largest component, Cree Inc. (CREE), has jumped 24.2% in the past month, largely on the strength of a strong quarterly earnings report, which included that its LED lighting product revenue doubled from a year ago.

Another of the motif’s biggest stocks, Tesla Motors (TSLA), has climbed more than 7% in the past month after a strong earnings report that quieted production concerns, as well as raves about its newest electric vehicle.   

The sustainability of this resurgence has a chance to say a lot about how investors perceive once-hot growth sectors in 2013.

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