Wall Street sifts stock plays on White House race

WASHINGTON (Reuters) - Behind all the campaign hoopla, the presidential election presents both opportunities and threats to stock market investors, depending on who wins, say analysts studying the candidates.

For instance, if New York Democratic Sen. Hillary Clinton goes to the White House, some analysts see a possible boost for badly battered homebuilder stocks like D.R. Horton Inc, Pulte Homes Inc or KB Home.

The former first lady wants to slap a freeze on home foreclosures and send billions of dollars in aid to distressed homeowners. That could slow the foreclosure wave and relieve price pressures hammering homebuilders.

On the other hand, a likely long-term loser under Clinton would be the health care sector, "especially HMOs and branded prescription drug makers," says Robbert van Batenburg, an analyst at Louis Capital Markets.

Investing scenarios -- positive and negative -- are being developed by analysts for all major candidates, including Democrats Sen. Barack Obama and former Sen. John Edwards, and Republicans Sen. John McCain, former New York Mayor Rudy Giuliani and former governors Mitt Romney and Mike Huckabee.

With months to go in the candidate selection process and elections not until November, analysts cautioned against over-reaction at this stage by investors.

Citigroup analyst Tobias Levkovich says, "We suspect that investment positioning for election outcomes will not be taken up in earnest until somewhere around mid-year 2008."

Still, Stanford Group Co policy analyst Jaret Seiberg says, "Washington can have good and bad impacts on business. You're better off if you can position yourself to take advantage of the benefits and try to shield yourself from the negatives."

Some construction stocks might look good if Republicans win. Except for McCain, they widely favor building hundreds of miles of fence along the Mexican border to control illegal immigration. Van Batenburg says Granite Construction Inc could be a winner from such a mega-project.

Some Republicans want tamper-proof, biometric identity cards for non-citizens. That could help identification technology companies such as Cogent Inc, he says.

ENERGY PROSPECTS

Wall Street is also studying election prospects for the energy sector, from wind to ethanol to clean coal to nuclear.

"Democratic candidates, for the most part, would likely be a more positive policy outcome for the clean energy sector than their Republican peers," say Morgan Stanley analysts.

In a report issued last week, the analysts say Edwards has the most aggressive ethanol production targets. Obama and Clinton also would lift the sector, while Republicans put more emphasis on oil, coal and nuclear power.

Finally, the wars in Iraq and Afghanistan loom as perhaps the toughest issues that will face the new president. If one or both conflicts wind down, federal information technology contractors may see a return to non-war budgeting.

That could help contracting firms such as SRA International Inc, Science Applications International Corp and MTC Technologies Inc, says Stanford Group analyst Erik Olbeter in a 2007 report.

But he adds that a wild card would be spending at intelligence agencies, which Clinton's husband Bill cut during his presidency. The administration of George W. Bush has spent heavily on intelligence, although budgets are flattening now.

Any future cuts at the CIA and other could hurt companies such as Science Applications, ManTech International Corp and CACI International Inc, he says.

(Editing by Braden Reddall)