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ConocoPhillips (COP), Pfizer Inc. (PFE), Cytec Industries Inc (CYT): Forget Bernanke, Invest Alongside His Potential Successor

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At StreetAuthority, we often look at where Washington’s most powerful men are putting their money. Recently, we learned what not to do from Barack Obama’s portfolio, picked up some tips on diversification from Mitt Romney and revealed Ron Paul’s affinity for gold and silver miners.

But none of these men have the potential clout of a woman who may soon become the world’s most powerful economic force.

If you’re thinking of Hillary Clinton, Marissa Mayer or Angela Merkel, you’re wrong.

As the first chairwoman of the Federal Reserve, Janet Yellen would have a deciding role in determining the monetary policy of the world’s largest economy and her portfolio holds some interesting stocks.

I know, Yellen has yet to be nominated to be the next Fed chief, let alone approved by Congress. Do I know something you don’t? I don’t have a crystal ball into the president’s next move but there are several reasons that lead me to believe Yellen should be the odds-on favorite.

ConocoPhillips (NYSE:COP)

First, Yellen has been on the Fed board for a full economic cycle, and she’s been there for the discussions on an unprecedented monetary policy. Obama needs that kind of institutional knowledge to help guide policy coming out of this historic period. Second, Yellen is much more dovish than any other possible pick, helping to assure the president that monetary policy will remain accommodative as long as necessary — especially if Congress can’t pass a responsible fiscal package.

Beyond her substantial experience and qualifications for the post, Yellen may be the nominee for a more controversial reason. Never has the Federal Reserve been led by a woman. As the nation’s first black president, Obama is unlikely to overlook the social implications of nominating Yellen.

Other than Yellen, only former Treasury Secretary Larry Summers is in the running for the Fed chair. Summers has a strong background in crisis management, but he’s also closely connected to Wall Street, having served as a consultant for Citigroup Inc (NYSE:C) and other large firms. His role in the 1999 repeal of the Glass-Steagall Act, which really allowed the banks to become “too big to fail,” makes him a poor choice to oversee key provisions of Dodd-Frank regulation. Obama recently defended Summers’ reputation, but I think this is just a front to keep from showing bias toward Yellen as the eventual pick.

Yellen has taught at Harvard University and the University of California at Berkley. She was the president of the San Francisco Fed from 2004 until 2010, when Obama nominated her to the Federal Reserve Board of Governors.

Most of her assets are held in a living trust held jointly with her husband, the Nobel Prize-winning economist George Akerlof. (The fact that assets are held in a trust means little other than that the estate will not go through probate to heirs.) Of Yellen’s estimated net worth of $3.5 million to $7.5 million, the largest portion is held in a diversified mix of Fidelity and Vanguard funds. She also has a considerable amount in Berkley’s defined contribution program along with retirement benefits she is currently receiving.

Yellen’s Top Stock Picks
Most interesting in the most recent financial disclosure is her holding of individual stocks. While Yellen holds an extremely large and diversified portfolio through funds, she holds direct equity positions in fewer than 10 individual companies. Her individual holdings are an odd mix of energy, industrials, consumer discretionary, technology and defense. Yellen’s portfolio is also heavily weighted for a cash return, with her three largest holdings paying an average 3.5% dividend yield.

Her largest holding is up to $100,000 in shares of ConocoPhillips (NYSE:COP), the world’s largest exploration and production company, with a market cap of $80 billion. Lately, investors have feared that ConocoPhillips (NYSE:COP) will have a tough time paying for its strong 4.1% dividend from cash flow as the company increases its capital expenditures for Canadian heavy oil and offshore projects. These large projects should start adding significantly to production and requiring less capital spending after 2014, giving the company a huge boost to cash flow.

Wikipedia/Federal Reserve
Will Janet Yellen become the next chairman of the Federal Reserve?
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