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Guard Your Portfolio Against the Possibility of War in Iran
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GM, F, SWFT, FDX, UPS, WMT, TGT, HD, LOW, AMR, LUV, MO, BUD, BA, UTX, FLR, HAL, XOM
This past week the aircraft carrier U.S.S. John C. Stennis and a bevy of other U.S. warships entered middle-eastern waters.
The purpose of its mission: To reassure our allies in the Gulf region, and to serve as a warning to Iran that it had better rethink its nuclear ambitions.
But does the increased American firepower in Gulf waters mean that we are going to war with Iran?
I don't think so.
While there's little doubt that the U.S. could pummel Iran into submission, a conflict would probably serve as a distraction from our mission in Iraq and our ongoing negotiations with North Korea.
In addition, in spite of what you might hear on the nightly news, I don't think that the average Iranian wants to go to war.
That's because the Iranian economy is in shambles (the official unemployment rate is 11%, but some say it could actually be double that reported figure), and war with the U.S. would undoubtedly cause their economic blight to worsen.
Beyond that, some Iranian officials are beginning to publicly denounce Mahmoud Ahmadinejad's hard line stance toward the west, instead calling for an open dialogue.
Overall, I believe that because of these factors there's actually a solid chance that this potential confrontation may end without a shot being fired.
But a word of warnings folks -- my sentiments and assessments of national security and geopolitical concerns don't mean a thing. I'm an investor, not a policymaker.
However, as an investor, the one thing that I do know for sure is that the possibility of a military confrontation with Iran shouldn't be overlooked.
Investors should pay particular attention to this situation, because a conflict could disrupt crucial oil supplies, which would in turn force up the price of gasoline. Naturally, this would adversely impact both individual and corporate spending.
What companies are the most vulnerable to rising fuel prices and to looming tensions in the Gulf?
It goes without saying that automakers such as General Motors (GM), and Ford (F) would take a hit as consumer spending would drop. Tractor trailer operators such as Swift Transportation (SWFT), for example, would take a hit. So would companies such as FedEx (FDX) and UPS (UPS) because although they would try to pass along some of the rising cost to their consumers, they would have to absorb a significant percentage of the increase.
Then there are the retailers. Do you know how much is shipped everyday by truck to stores such as Wal-Mart (WMT) and Target (TGT)? While they too might be able to pass along some of the cost to the consumer, they would get hit pretty hard. Other notable companies that would likely tank on hostilities include Home Depot (HD), Lowe's (LOW), AMR Corp (AMR), and Southwest Airlines (LUV).
With that in mind, there are several companies that I think would fare comparatively well should a confrontation come to fruition. My top picks are:
Altria Group (MO) -- Smoking will never go out of style.
Budweiser (BUD) -- Neither will alcohol.
Boeing (BA) -- Even if it's a short-lived war, new military aircraft and parts will be needed.
United Technologies (UTX) -- These guys make the Blackhawk helicopter. Lots of spare parts and new aircraft would be needed to refurbish the force after a fight and leading up to one.
Fluor Corp (FLR) -- The company provides engineering and construction services. They will be active in the rebuilding of Iran after a conflict.
Halliburton (HAL) -- Regardless of your political leanings and thoughts on the company, it would be instrumental in rebuilding damaged oil infrastructure.
Exxon Mobil (XOM) -- We all saw the boat loads of money these guys brought in when gas was at $3 a gallon last year! The caveat here however, is that if the U.S. scores an early victory in a war with Iran, oil prices could plummet immediately, and drive down the stock with it.
The Bottom Line
I don't think that a war with Iran is inevitable by any means. In fact, it is not in anyone's interest.
However, as concerned citizens and as investors, we should all be aware of the ramifications of a potential conflict and be prepared to act accordingly.
The purpose of its mission: To reassure our allies in the Gulf region, and to serve as a warning to Iran that it had better rethink its nuclear ambitions.
But does the increased American firepower in Gulf waters mean that we are going to war with Iran?
I don't think so.
While there's little doubt that the U.S. could pummel Iran into submission, a conflict would probably serve as a distraction from our mission in Iraq and our ongoing negotiations with North Korea.
In addition, in spite of what you might hear on the nightly news, I don't think that the average Iranian wants to go to war.
That's because the Iranian economy is in shambles (the official unemployment rate is 11%, but some say it could actually be double that reported figure), and war with the U.S. would undoubtedly cause their economic blight to worsen.
Beyond that, some Iranian officials are beginning to publicly denounce Mahmoud Ahmadinejad's hard line stance toward the west, instead calling for an open dialogue.
Overall, I believe that because of these factors there's actually a solid chance that this potential confrontation may end without a shot being fired.
But a word of warnings folks -- my sentiments and assessments of national security and geopolitical concerns don't mean a thing. I'm an investor, not a policymaker.
However, as an investor, the one thing that I do know for sure is that the possibility of a military confrontation with Iran shouldn't be overlooked.
Investors should pay particular attention to this situation, because a conflict could disrupt crucial oil supplies, which would in turn force up the price of gasoline. Naturally, this would adversely impact both individual and corporate spending.
It goes without saying that automakers such as General Motors (GM), and Ford (F) would take a hit as consumer spending would drop. Tractor trailer operators such as Swift Transportation (SWFT), for example, would take a hit. So would companies such as FedEx (FDX) and UPS (UPS) because although they would try to pass along some of the rising cost to their consumers, they would have to absorb a significant percentage of the increase.
Then there are the retailers. Do you know how much is shipped everyday by truck to stores such as Wal-Mart (WMT) and Target (TGT)? While they too might be able to pass along some of the cost to the consumer, they would get hit pretty hard. Other notable companies that would likely tank on hostilities include Home Depot (HD), Lowe's (LOW), AMR Corp (AMR), and Southwest Airlines (LUV).
With that in mind, there are several companies that I think would fare comparatively well should a confrontation come to fruition. My top picks are:
Altria Group (MO) -- Smoking will never go out of style.
Budweiser (BUD) -- Neither will alcohol.
Boeing (BA) -- Even if it's a short-lived war, new military aircraft and parts will be needed.
United Technologies (UTX) -- These guys make the Blackhawk helicopter. Lots of spare parts and new aircraft would be needed to refurbish the force after a fight and leading up to one.
Fluor Corp (FLR) -- The company provides engineering and construction services. They will be active in the rebuilding of Iran after a conflict.
Halliburton (HAL) -- Regardless of your political leanings and thoughts on the company, it would be instrumental in rebuilding damaged oil infrastructure.
Exxon Mobil (XOM) -- We all saw the boat loads of money these guys brought in when gas was at $3 a gallon last year! The caveat here however, is that if the U.S. scores an early victory in a war with Iran, oil prices could plummet immediately, and drive down the stock with it.
The Bottom Line
I don't think that a war with Iran is inevitable by any means. In fact, it is not in anyone's interest.
However, as concerned citizens and as investors, we should all be aware of the ramifications of a potential conflict and be prepared to act accordingly.
by
Glenn Curtis
Glenn Curtis started his career as an equity analyst at Cantone Research, a New Jersey-based regional brokerage firm. He has since worked as an equity analyst and a financial writer at a number of print/web publications and brokerage firms including Registered Representative Magazine, Advanced Trading Magazine, Worldlyinvestor.com, RealMoney.com, TheStreet.com and Prudential Securities. Curtis has also held Series 6,7,24 and 63 securities licenses.
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