The new Gates effect -- Bob not Bill

Posted Nov 8th 2006 2:30PM by Peter Cohan
Filed under: Brinker Intl (EAT)

This afternoon's announcement that Robert Gates will take Donald Rumsfeld's job as Secretary of Defense highlights some investment opportunities. How so? Gates serves on the boards of NACCO Industries, Inc., (NYSE: NC), Brinker International, Inc. (NYSE: EAT), and Parker Drilling Company, Inc. (NYSE: PKD).

My take is that each of them could be a buy because this administration likes to direct government money toward companies run by its leaders -- see this analysis of the W-Industrial Complex. Here's why:

NACCO is up 3% today. This lift trucks, housewares and coal mining conglomerate had $3.3 billion in sales and $64 million in profit during the last 12 months. The stock is up 23% in the last year.
Brinker is up 1% today. This owner of Chili's Grill & Bar, Romano's Macaroni Grill, Maggiano's Little Italy and On The Border Mexican Grill & Cantina had $4.2 billion in sales and $223 million in profit during the last 12 months. The stock is up 22% in the last year and its earnings are forecast to grow 13% to $2.96 in FY 2008. EAT trades a P/E of 18.
Parker Drilling.is up 4.25% today. This contract oil drilling company had $590 million in sales and $101 million in profit during the last 12 months. The stock is down 7% in the last year and its earnings are forecast to grow 60% to $0.80 in FY 2007. PKD trades a P/E of 8.6.

To be safe, I'd say that Parker Drilling and NACCO are more likely to benefit from high energy prices abetted by administration policy. But Mexican food may be quite popular among the members of the administration -- even the former ones. You never know, Donald Rumsfeld may find himself drowning his sorrows with a Margarita at On The Border Mexican Grill.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, and a Professor of Management at Babson College. He has no financial interest in Brinker, NACCO, or Parker Drilling.

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Reader Comments (Page 1 of 1)

11-08-2006 @ 5:56PM

Bill Kettler said...

You can't wait to dis the next guy no matter his qualifications. How pays for your cockeyed sh**?

The guy is smart, gives his life to service and you can't wait to sh** on him.

Bleep off

11-08-2006 @ 6:53PM

Ken Carpenter said...

It is interesting to wonder what effect the resignation of Mr. Rumsfeld would have had on the election results had he resigned a week earlier ...

11-08-2006 @ 11:11PM

B. Wright said...

A political party needs a scapegoat to get into office to promote their specific agenda and Rumsfeld was this years target. Most of the candidates used the Iraq War and personal attacks to get in. I wonder, after all of his years of service to multiple Presidents, what would have been the results if all candidates had clearly stated and committed what they would do if elected and not the mud slinging. Boy are the American People gullible by not demanding of both Republican and Democrat that they both answer the question. What's wrong with the current situation and what are you going to do to fix it if you disagree with the current direction. Then vote for the candidate with the answer that satisfies you the voter. Let's put them on the spot by asking our new reps "Now that your in what are you going to do to keep my vote in two years??. No more Rumsfeld like bashing to get elected.

11-09-2006 @ 1:13AM

Mr. noitall said...

Although Peter Cohan does offer some sound finacial advise at times. When it comes to discussing politics, readers have to realize that he is obviously a Democrat who is bias to the point that he becomes irrational. You just have to accept this fact, cursing at him is a waste of time. His "W-Industrial Complex" article is a joke.

11-09-2006 @ 4:50PM

Mark Strozenberg said...

If you read Novak’s article you'll get the impression that Gates might not be qualified, and Bush may prefer it that way. It's quite obvious to me that Bush only wants someone who will push forward with his personal agenda... and Gates may just be the perfect guy for the job.

http://www.bobgates.net/index.php/2006/11/09/will-lack-of-experience-be-a-problem/