Shares that will benefit from the Top Trump Effect?

11th Nov '16 by iwright7

13 comments 9581 reads

Having just about recovered from the shock of Wednesday's US election result I have been reflecting on the industries mentioned in Trump's acceptance speech. One sector in particular stands out:

“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”

Construction is close to Trump's heart having built many hotels and office towers having made $millions in the process. So we can expect to see this sector get special Trump treatment.

Of the UK listed Construction related companies Somero Enterprises Inc (LON:SOM) (I am holder) derives 75% of its laser guided concrete leveling equipment revenue from the US. SOM has good long term relative strength and individual QVM scores of 99, 67 and 93 respectively producing an overall SR of 98. In addition the last set of glittering interim results contained a positive outlook, well before Trump's election. What's more the current PER is <9 even with a very modest FY 2017 EPS% broker forecast. This 2017 +6.5% EPS forecast now looks far too cautious.

Other Top Trump suggestions are welcome...

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ls2g08

11th Nov '16

On the day before the election as I was not able to short or buy option contracts, I went long shares I thought would benefit under a trump pres. themes being - defense, infrastructure spending & lower bank regulation. It has seemly worked very well (by effectively being a bad hedge haha!) as my portfolio didn't fall much but the hedge positions have gone up dramatically!

I purchased:

Parker-Hannifin (NYSE:PH)

Northrop Grumman Corporation ($NOC)

United Therapeutics Corporation ($UTHR)

Morgan Stanley ($MS)

Rio Tinto (LON:RIO)

I continued to hold

Commercial Metals Co. ($CMC)

Somero Enterprises Inc (LON:SOM)

Gold Bullion Securities ETC (LON:GBSS)

Tortoise investor

Pharmaceuticals will probably do well as they feared Clinton's reforms, although you might have missed some of the bump.

It might be worth keeping an eye on whether any stocks with a strong emerging market bias get oversold. I like City of London Investment (LON:CLIG) as a company, nice dividends and wonderfully transparent management, and I've noticed they've come off a bit in the last few days although some of this might be a post ex-dividend slump.

Bushranger

The company looks good. There are some areas of Trumps policy that is different but perhaps not controversial. These areas will probably see change the fastest. My only concern with companies in $US is the Pound strengthening and reducing some of the gain in as long term hold. What would be the reasons this American company lists on the LSE and not a US one?

vik2001

I think a infrastructure fund be good to get, something like first state global infrastructure.

rhomboid1

My favoured pure infrastructure play is Hill & Smith Holdings (LON:HILS), they have c. 40% of their businesses in the US and stand to benefit from any uplift in activities, a particular niche is the mobile barriers that are used to separate streams of traffic and construction activities when road upgrades are taking place. Their products have major advantages over the older concrete types , being both more effective and easier to transport and erect . The last results presentation gives a gallop through http://miranda.hemscott.com/ir/hils/pdf/2016-half-year-results-presentation-v2.pdf

They're not cheap but are growing fast whilst improving margins in a highly regulated series of niches that offer good prospects globally.

Somero is much cheaper but more illiquid

Your not alone in your assessment as the stock has jumped 20% since Trump being elected. I'm a little hesitant to dive into the stocks like this one, that have had a sudden jump of 20+% post Trump. These companies may lose some ground before the Trumps changes kick in.

I know what you mean , Hill & Smith Holdings (LON:HILS) is up 80% since I bought 12 months ago and I keep fighting the urge to sell as they look expensive, the analogy I hold onto is Halma (LON:HLMA) which operates in similar regulated niche sectors and growing business both by acquisition and organically, Halma has never been cheap but it has massively rewarded the patient investor. I as an impatient early investor have learnt my lesson I hope!

Aislabie

The reason Somero is listed in the UK is a historic one. The company was acquired by a UK private equity outfit and when realising their investment it was natural for them to do this in London. The Somero management is on record as being very happy with their AIM listing and have emphasised this in presentations here.
Much of the future growth is expected to be outside the US, China being a key prospect.

"Much of the future growth is expected to be outside the US, China being a key prospect."

Maybe they will rethink that one in the coming year!

I bought a small holding in £Gattaca today as I agree with Paul Scotts assessment that it looks very sound. UK and now US look as though they are going to push through large infrustrucure projects which will benifit them immensly. Theresa May in India was talking about relaxing visas to help bring in the brightest and the best from there, mentioning engineers and IT specialists. Just up Gattacas street. The bid- offer spread from my broker was a horrendus 19p. I managed to get it for less but dont know if I still got ripped off. This is all a learning curve for me.

iwright7

14th Nov '16

One of the share mags has today tipped Somero Enterprises Inc (LON:SOM). It makes similar US infrastructure spending points to the above and adding in the proposed colossal tax credits for private infrastucture investors..... Mr Trump's plans involve granting $137bn of tax credits to construction companies in order to leverage $1 trillion of investment targeted at "fixing our inner cities" . Ian

VegPatch

16th Nov '16

I think Gencor (GENC US) looks really well placed to benefit from a Trump win. It makes asphalt machines for laying tarmac. I wrote about it in Jan 2015 when it was $9.40 and seemingly going nowhere.

http://www.stockopedia.com/content/gencor-industries-interesting-net-net-an-in-depth-view-90000/

Its main attraction was almost $9 of cash on the balance sheet, so it had sufficient resources to ride out a prolonged downturn on highway spending. US Highways have been under real real budgetary pressure since 2008. Previously the Highways Trust Fund was funded on a rolling 2 year basis for the last decade. The act itself and the funding was short term and the condition of the US highways has deteriorated badly since 2008. However in December 2015 the Obama Administration signed the 5 yr $305bn FAST Act (Fixing Americas Surface Transportation) funded by an 18c gallon gasoline tax. This 5 year act replaced the previous 2 year continuations, and has given real clarity over expenditure. The increase in spend has been funded by the traditional 18c gallon tax plus more Federal contributions. The new FAST Act has earmarked $205bn for spending on Highways. Demand has really started to pick up as a result.

If you then add in that |Trump wants to spend $1tn on infrastructure then Gencor could be in a sweetspot for the next 5 years. These are the CEOs Q3 comments:

"“I am pleased to report another quarter of significant growth for Gencor. Revenues increased over 80% in the third quarter and 78% for the first nine months of fiscal 2016. Demand for Gencor’s equipment continues to be robust. Gross margins remain solid even though pricing is very competitive. SG&A as a percentage of revenue has dropped notably as a result of maintaining tight controls on general and administrative expenses. We have increased sales efforts to capitalize on the greatly improved outlook for the domestic highway construction industry.

"Domestic demand for our products continues to be robust. Customers have begun making inquiries for shipments of our asphalt plants into 2017. Typically, customers start planning the purchase of next year’s equipment in the fall. We are hopeful that many of these opportunities will turn into orders.

With the first half of fiscal 2016 complete and a backlog of $31.6 million going into the third quarter, I am optimistic that fiscal 2016 revenues will be up significantly from fiscal 2015. On the cost side, we continue to benefit from tight controls on costs. This should result in a continued improvement in operating margins.”

Gencor trades at $14, of which $10 per share is cash from the sale of a business a few years ago. Therefore on an underlying basis the rump trades on about 7x PE. This isnt the highest quality business with low barriers to entry, but after having survived a prolonged period of low activity I think sales and margins are likely to surprise on the upside for the next few years.

dfhscgfsd

17th Nov '16

This is probably better posted here than starting a new thread.
Does anyone have any thoughts on the corporate tax rate and the repatriation of overseas cash piles which Trump has been talking about.
Currently the tax rate is 35%, i have been reading figures suggesting not only could this reduce to 15% but possibly a one time special amnesty rate of 10%.
If he attempts to force companies to bring money back on shore could we see some large mergers?
Nice special divis maybe?
Some of the companies with big cash piles
(Market Cap / Est. Cash Pile billion dollars)
Apple 610 / 215
Microsoft 476 / 109
Cisco 160 / 60
Oracle 165 / 48

Shares that will benefit from the Top Trump Effect?

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Iwright7

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