Stocks that suffer if Congress cuts costs
Listening to both Republicans and Democrats spout off these days, it sounds like austerity is the new patriotism. Both parties vow to cut federal spending. Republicans, urged on by their Tea Party wing, say deficit reduction is their top priority.
If and when rhetoric begets actions, stocks that depend on federal spending for a substantial part of their revenue will come under scrutiny. My advice to investors: weigh how much of the budget cutting news is already reflected in the price of a particular stock. The higher the share price relative to earnings, the more vulnerable it is.
John Dorfman, chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own.
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