Contents. Introduction 3. Biotech 4. Defense 6. Finance 8. Infrastructure 10. Manufacturing Stocks For The Trump Presidency

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2 Contents Introduction 3 Biotech 4 Defense 6 Finance 8 Infrastructure 10 Manufacturing 13 2

3 Introduction One of the most bitter presidential election campaigns in U.S. history is in the rear view mirror. The uncertainty that has been holding down the market is finally over. Let the profit making begin. With Donald Trump s surprise win, certain sectors stand to do better than others, and certain stocks within those sectors look to have a special advantage moving forward. The biotechnology space could be in for a growth explosion if Trump successfully streamlines the drug approval process and holds off price controls. A promised surge in defense spending could send certain stocks skyrocketing, particularly those that were well positioned for growth even before the election. The prospect of higher interest rates during the new administration could unleash windfall profits in the financial world. Trump s campaign promises and his reputation as a builder suggest that walls, roads, bridges, and other construction projects will receive high priority. Democrats have already indicated they would cooperate on an infrastructure plan. Finally, in the interest of full disclosure, our fifth pick is not a stock at all. It s an ETF. This basket of stocks covers small and micro-cap industrial companies in the U.S. If Trump is serious about improving industry in America, this will be a great place to invest your money. To see these five specific, high-potential recommendations, please read on. 3

4 Biotech When Hillary Clinton was projected to win the presidency, it was seen as a big negative for the biotechnology sector. After all, Clinton would somewhat-regularly tweet out her displeasure with drug price increases, while a Democrat majority was seen as more likely to rein in prices and regulate the sector. But with a Trump victory, all of that is out the window, and that is part of the reason we saw such a nice surge in the biotech world immediately following the Republicans surprise victory across the board. Additionally, a Trump win looks to be good news for drug companies pushing products through the FDA pipeline as Trump looks to streamline the drug approval process, something that should be great news for the biotech world going forward. 4

5 Top Pick: Incyte Corp (INCY) The biotechnology space is notoriously difficult to invest in, so an ETF approach may be a good idea for some investors. However, one individual company that should be on your radar is INCY, a Delaware-based biotech firm that specializes in the cancer market. INCY has a drug on the market, while it also has some in the pipeline, so it should benefit from reduced regulation in the space. But beyond Trump, the company is looking pretty impressive thanks to surging analyst estimates. In fact, we haven t seen any estimates lower for the current quarter or the current year in the past two months, while the current year consensus has more than doubled in a month, while the current quarter figure has swung into profit territory, making INCY an intriguing pick in this environment. 5

6 Defense This corner of the economy could benefit from a massive surge in defense spending, as some believe that Trump will look to spend somewhere near $500 billion more on defense, pushing total U.S. defense spending near the one trillion dollar mark per year. As you might be able to guess, this huge increase is being viewed favorably by the defense stocks, and we have seen several of these surge following Trump s win. Plus, the industry rank here is in the top 20% overall, so there is plenty to like in terms of investment choices. 6

7 Top Pick: Northrop Grumman (NOC) One that might be worth a closer look in this environment is NOC. This is a top ranked stock that analysts already loved before the Trump catalyst came along, and a massive burst of spending only makes the case for Northrop all the more impressive. The company is expected to post EPS growth in excess of 27% this year, while the consensus analyst estimate has increased by over six percent in the past month for the stock, showcasing the increased potential for this company. And as you can see in the chart below, NOC has a great history in earnings season, and it has been seeing rising earnings estimates for quite some time. Clearly, this is a stock that is well-positioned no matter what happens in the Oval Office. 7

8 Finance One of the biggest issues in the financial world over the last few years has been the stubbornly low interest rates. Low rates make it difficult for financial companies to obtain fat profits, and there was little prospect of a big jump in rates in the near term too, leaving outlooks for most companies subdued. However, Treasury bond yields have been soaring lately, as investors seem to think that Trump will look to push through a lot of spending or try to get wages higher, two items which are generally considered inflationary. There are also some concerns that large holders of Treasury bonds are selling off some of their positions in the wake of Trump s victory, so that could be playing a role in the T-bond sell-off as well. Either way, the surging yields are great news for companies in the financial world, as rising rates allow for a wider spread between long and short term rates for banks, while it increases the income on the float, or uninvested capital, at brokerage houses. Either way should be great news for investors in this segment, but I think brokers or regional banks may be safer 8

9 bets, since Trump may look to squash some M&A deals (such as those in the media world) and that may hit the big Wall Street banks out there, though all should do better in a less stringent regulatory environment. Top Pick: Charles Schwab (SCHW) Schwab looks to be one of the biggest beneficiaries from the higher rate trend, as the company makes a healthy sum off of net interest revenues on its over $2.7 trillion in assets. As you can see in the chart below, these numbers were already on the rise, so a huge move in yields should only help SCHW s position that much more, especially if Schwab can continue to increase the number of accounts and assets on its platform. But the reasons to like SCHW go beyond higher rates, as the company is projected to see EPS growth of over 33% this year, and sales growth of over 16%. It is also hard to find analysts who are lowering their estimates, as most seem to agree that the prospects for Charles Schwab are bright in the near term. 9

10 Infrastructure While it remains to be seen what Trump s priorities will be, I think it would be foolish to overlook the potential of a big infrastructure bill out of the gate. That is because Nancy Pelosi has already said that she would be willing to work with Trump on an infrastructure plan, something that I think most can agree is badly needed in this country. Plus, a bipartisan agreement would be an easy win for Donald Trump before he gets to the more difficult or ambitious parts of his plan, allowing him to say See, I told you I could make bipartisan deals! pretty quickly into his tenure. And with some reports of a trillion dollar infrastructure package, this could be not only a massive fiscal stimulus, but a boon for companies in 10

11 the infrastructure world as well. Top Pick: Gibraltar Industries (ROCK) Gibraltar Industries operates in a couple of key segments which look to benefit from a construction spending boom. ROCK also has a new focus on a few important areas which look to be at the heart of any government spending plan, namely the improvement of decaying infrastructure, bridge and elevated highway construction, as well as a number of residential applications as well. Plus, ROCK recently divested its European industrial business, so the company should be more focused on the American landscape anyway. It is really the industrial segment which looks to benefit the most from a Trump infrastructure plan, as the company is actually #1 in the U.S. in a number of key markets and critical building applications. As you can see in Gibraltar Industries chart below, the company has market leadership in several important areas, which should greatly help the company in the event of a massive fiscal stimulus from the government that is focused on making our infrastructure second to none. 11

12 If that wasn t enough, investors should also note that ROCK has been seeing rising earnings estimates as of late, and it is expected to post great growth numbers this year, including nearly 45% EPS growth. Add that into a top Zacks Rank and an impressive history during earnings season, and investors may want to keep this company on their watch list as a prime beneficiary from an infrastructure spending surge. 12

13 Manufacturing On the road to the presidency, Donald Trump really talked up the idea of bringing back jobs to the country s manufacturing sector, and boosting the importance of this critical industry. And with wins in a number of Rust Belt states, Trump will at least need to make an attempt to follow-through on this promise if he hopes to hold onto any legislative majorities when the 2018 mid-term elections come around. That is why I think a push to help this sector-- either via tax policy, tariffs, or other measures-- seems like a likely route for the near term. However, a focus on smaller companies appears to be a better plan, as these manufacturing companies are more likely 13

14 to be focused on the American market, and will have fewer foreign operations. Top Pick: First Trust RBA American Industrial Renaissance ETF (AIRR) If there was ever a Make America Great Again ETF this was it. I mean, look at the name of the fund, the American Industrial Renaissance ETF. The fund focuses on small and micro cap industrial companies in the U.S., with a small amount in community banks as well. All market caps here are below $10 billion, while the PE is still at a reasonable level right around the 20 mark. The ETF also does a great job of spreading out assets, as no single company makes up over 3.5% of the total. But best of all, the fund excludes companies with non-u.s. sales greater than 25%, while it also excludes companies without positive 12-month forward earnings. So, it focuses on the American winners in the industrial world. The fund was bid up following the election, so investors might want to be prepared for a pullback in the short term. Additionally, volume levels can be low, so keep the idea of using limit orders in mind. However, I think long term, if Trump is serious about improving industry in America, this is the ETF to profit, while it also has the added benefit of getting investors into the space without having to worry about winners and losers in the micro cap and small cap world. 14