With Donald Trump’s inauguration just moments away, investors are still busy trying to figure out which stocks could get them a nice return under his administration. Things are bound to be different this year considering that Republicans control both houses of Congress and that the new administration is expected to bring about significant changes in trade policies, tax laws and other business regulations.
This therefore means that one of the most important factors for investors to consider as they try to determine the future of a stock, is whether the company expects to have a good relationship with the Trump administration.
Trump’s primary campaign theme was “Make America Great Again” and one of the major aspects of this theme was the rebuilding of America’s crumbling infrastructure. This would include roads, shipping ports, airports, and of course the infamous wall along the Mexican border.
According to a recently released report by the U.S Department Of Transportation, 26 percent of all existing bridges or 61,000 of them are structurally deficient and need replacing or repair while 33 percent of major roads and highways are in poor condition. Clearly, there is an exceptionally long list of infrastructure needs in the country even without factoring the border wall, which independent estimates project could cost at least $25 billion.
One way investors can take advantage of this opportunity is by looking at companies that stand to benefit from these projects as there is no doubt that they will require large amounts of cement and steel. In addition this, we should expect that stocks which will do well are from companies which plan to focus on not only increasing their investment in the country but also their domestic hiring, considering Trump has already said that they will receive special treatment in order to encourage such efforts.
As such, the following are five stocks that we believe have the ability to bring investors above average returns under the new Trump administration.
General Motors (NYSE: GM) has had a great start to the year, having reported strong Auto sales in December which beat analysts’ expectations. However, this is not the only reason why we believe that this will be a great pick for investors this year. The company recently put to rest any fears with regards to its future with the incoming Trump administration by announcing that it would be making a $1 billion investment thereby creating 1500 U.S jobs.
Donald Trump took note and in return posted a tweet appreciating the move. Trump has been especially critical of auto companies that outsource jobs while neglecting to invest in the new jobs in the United States. As the carmaker continues being more vocal about its plans to hire and invest more in the country, investors can remain confident that the company will remain on the good side of the administration.
Considering that GM plans to launch its first mass produced electric vehicle later this year, the Chevy Bolt, a bit of political goodwill can go a long way in helping its stock.
Lockheed Martin Corp. (NYSE: LMT) is the largest U.S Defense contractor in terms of sales which come in at about $47 billion annually. It primary focus is on aviation, missile and fire control system supplies.
Lockheed also happens to be the lead contractor on the team that develops and builds the F-35 stealth fighter. Although it might seem counterintuitive to consider this company given that Trump recently called it out on the jet’s pricing, this is a stock that is certainly poised to benefit immensely from his administration.
This is because the incoming president had recently pointed out that the fleet of ships and aircrafts in the U.S military arsenal were aging and planned to reinvest in the country’s defense system, which bodes well for contractors like Lockheed. This company is particularly well positioned considering that apart from retooling conventional military gear, it is among the leaders of the 21st Century’s warfare technology including both drones and smart bombs.
Cemex (NYSE: CX) is a global supplier of cement, ready to mix concrete and aggregates. It is the largest cement producer in the U.S with 381 ready-mix concrete plants and 13 cement production plants. While shares haven’t recovered after taking a massive beat down during the last global financial crisis where they dropped from an all-time high of $27 per share to about $4 per share, a recovery appears to be in the horizon with the expected spending on infrastructure.
JP Morgan Chase (NYSE: JPM) is another stock that investors should consider due to a couple of reasons. So far, financial stocks have been on an uptrend since Election Day fuelled by the expectation that a Trump administration will advocate for looser regulations, allowing for more loans and profits. In addition to this, JP Morgan Chase which is the largest U.S bank by assets has probably the best reputation among big banks right now and CEO Jamie Dimon has close ties to the GOP and Trump himself.
Dimon recently joined a policy forum to advise the incoming administration and even rumor had it that he would be tapped for the new Treasury Secretary role before Steven Mnuchin was picked.
Furthermore, with the federal reserve hiking rates in December last year as well as the expectations of more this year, financials are set to be among the top performers of the market as they benefit from higher interest margin tailwinds and a highly favorable regulatory environment under President Trump.
Nucor (NYSE: NUE) is the largest steel maker in the United States with an annual capacity of 25 million tons. From its recent price action which saw the shares rally by about 38 percent since Election Day, it is clear that investors have been keen on capitalizing this opportunity.
One of the reasons why Nucor is so appealing is that compared to its next largest rival, United States Steel Corp (NYSE: X) is has the major advantage of being able to produce its steel products close to where they will be used. This important because the transportation of steel over long distances is expensive and with the company’s 15 smaller mini-mills, it is able to modify and retrofit for different types of still production.
The fact that it has been a dividend aristocrat, paying investors for the last 43 years with a current yield of 2.5 percent also offers a nice steady income stream with the possibility of a further increase.