How the 2012 Election Can Be a Major Win for Your Portfolio

Like it or not, we are in the thick of election season. It would be naïve to think that this will only last through November, because you know the pundits won't stop yapping for months after the election. We may get a month or two off before mid-term elections are upon us. It's an unfortunate reality -- the concept of the 24-hour news cycle -- but take comfort in knowing this election year is going to have a beneficial impact on a company that should be in your portfolio.

City of transients
Around the election years, Washington, D.C., becomes an even busier place than usual. The government is swarming with activity, along with interest groups, think tanks, and everything in between. Many of these people are not residents of the district and therefore need a place to stay. One company with a very strong presence in the area is Marriott International (NYS: MAR) . Though the company issued a tepid quarterly report, it's looking forward to the uptick in its D.C. operations, which accounts for a relatively major portion of U.S. revenue for a single city.

Read between the lines
Marriott ended last Thursday's trading session nearly 7% lower after scaring investors about the iffy economic environment around the world. It lowered forecasts, dropping revenue growth estimates by a point on both ends of the range. EPS forecasts actually edged up for the full-year 2012, though Mr. Market didn't seem to care. It's a hot-button issue around moody Wall Street to suggest global economic growth is slowing down again. The Middle East and Asia did not perform as well as the company expected, but in other areas it's doing quite well, and these areas will continue to be profitable value drivers in the near future.

Marriott's North American RevPAR, a measure of rates and occupancy, grew within the guided range at 6.5%.

Washington is of particular value to Marriott, more so than competitor Starwood Hotels and Resorts (NYS: HOT) , which owns fancy-schmancy hotel chains St. Regis and W. As mentioned in the recent conference call, Marriott brand bookings in the city for the second half of 2012 are up 10%, and up 16% for 2013.

Take a look at this chart that shows stock performance for Marriott, Starwood, Hyatt (NYS: H) , and Choice Hotels (NAS: CHH) .

H Chart
H Chart

H data by YCharts

Where the other companies show lackluster returns, Marriott's having a strong run this year. Choice is near its 52-week high, but the company recently took out a $400 million loan to help pay its dividend, a risky decision in my book. Hyatt trades at nearly 36 times forward earnings. Starwood and Marriott are much more reasonably priced at under 20 times.

Marriott's recent run, according to management, is driven by the election cycle's events around the country, but mainly in Washington. Obviously.

Group booking in the United States was a major revenue driver for the company as well. Growth in that segment reached 8% over last year.

Same old troublemakers
The usual suspects were the drags on Marriott -- which is why I am ultimately not concerned, because they are not issues to do with the company itself. The unstable regions in the Middle East, the slowing and stubborn economy of India, and the slowing and stubborn economy of China all forced Marriott to come out and say those words analysts hate: Demand softened.

I understand that these are situations to keep in mind, but it's as if everyone plugged their ears for the rest of the show. Margins for the company improved substantially year over year. Pre-tax margins are up 160 basis points. EBITDA growth was also impressive, increasing 13% over last year. Through dividends and stock repurchases, the company is looking to return around $1 billion to shareholders -- $400 million worth of shares were bought in the second quarter alone.

Trip insurance
So it sounds pretty good for Marriott, but there are a few things to keep an eye on. Obviously, the aforementioned trouble areas will likely continue to be laggards. Also, the government is releasing its budgets in the coming months, which will directly impact how much Marriott can expect to earn from government business.

The strong dollar also hurts Marriott abroad. I can't predict currency movements; therefore, I am looking to the most profitable business areas to help compensate for any forex charges.

The coming election is not only going to help Marriott, but other businesses as well. Our analysts have identified four stocks in industries from health care to aerospace that could bank serious wins from the 2012 election. Click here to read the free report.

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Fool contributor Michael Lewis owns none of the stocks mentioned. You can follow him on Twitter @mikeylewy. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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