It’s well-known that certain newsletter writers use politics to capture attention. By including political figures as part of their promotion, they connect with a large segment of their audience. For instance, they recognize that Donald Trump resonates more with typical investment newsletter readers compared to Kamala Harris. Using his name can spark increased interest and foster a sense of connection with potential subscribers. Many marketers have embraced this strategy, so today, we’ll analyze one such campaign.
Some newsletter writers have figured out how to use politics as a powerful tool to capture attention. By involving political figures within their marketing efforts, they manage to tap into a way to resonate with a broad segment of their audience. For example, they recognize that Trump generally appeals more to typical investment newsletter readers than Harris. Mentioning his name can spark greater interest and create a feeling of connection with potential subscribers. This approach has become quite common, so today we’re going to examine one such marketing strategy.
(A brief reminder before we continue: Political marketing tends to frustrate me. It often exploits division and emotions so overtly that it leaves me feeling extra cynical. Just to clarify, this isn’t a criticism of the readers or the political figures themselves. From my perspective, both Harris and Trump appear financially naive — perhaps because that’s what resonates with voters. Moreover, their policy proposals often seem misleading, as many of their promises are unlikely to materialize. These politically charged marketing campaigns usually seem to lean heavily in favor of Trump. This isn’t surprising, given that the main audience for these investment newsletters tends to be wealthy, white, conservative-leaning men aged 50 to 80. Regardless of whether you fall into that category, it’s clear that this is the market they are targeting.)
(Thinking about the initial statement and the use of collective patriotism as a marketing tactic, it’s useful to recall Samuel Johnson’s well-known quote regarding the final sanctuary of a rogue. Regardless of whether you agree with Gilani’s method, it’s crucial to understand that, much like any skilled marketer, he is aiming to influence your perspective. His objective might be to provoke anger that keeps you hooked or spark a sense of validation with a wave of “at last, someone understands!” enthusiasm that resonates with your beliefs.)
Now, assuming Trump secures the presidency and Congress supports his agenda, what exactly is “Document 20” that Gilani refers to? Here’s how he describes it…
The DJI Average’s annualized return of around 15% outperformed Trump’s first term and is comparable to the market’s performance under Bill Clinton. This underscores the idea that market trends are often driven by broader factors, not solely by the policies of a single president. “Document20” plan mentioned in the article likely refers to key elements of the Republican Party platform, which aligns with Trump’s political agenda, focusing on issues he has prioritized during his time in office.
Gilani points to companies that thrived during Trump’s first term as evidence of a potential market surge if he returns to power. However, many of these companies, like Axon (AXON), Trade Desk, and Xpel (XPEL), are only loosely connected to specific political policies. Axon’s appeal is linked to its law enforcement products, Trade Desk benefits from advertising on media outlets like Fox News, and Xpel’s performance is tied to its connection with Tesla. In reality, the growth of these companies is more attributable to broader market trends, including the pandemic boom and the speculative surge of 2021, rather than to direct political actions, such as Trump’s tariffs or deregulation efforts.
The influence of a president on the equity market is often overstated. While Trump’s firm tax cuts and deregulation policies likely played a role in boosting certain sectors, the overall market is more shaped by timing and external factors. Historical data shows that stock market performance under both major U.S. political parties has been similar over the long term. Presidents like Biden, Clinton, Obama, Trump rank among the top 6 for yearly compounded stock market returns, while others, such as Hoover, Cleveland, and George W. Bush, presided over periods of economic turmoil that contributed to weak stock market performance.
The stock market performed declined during Biden’s tenure compared to Trump, especially in sectors like tech, as evidenced by the 2022 Nasdaq crash. Surprisingly, even gold saw better returns during Trump’s term than Biden’s, despite both presidents not pushing for a “strong USD.” This highlights that broader economic forces, rather than presidential policies alone, significantly impact market outcomes.
Considering the present high worth of the U.S. stock market, the next president will likely inherit the second-highest valued market of all time. As history shows, buying stocks at such high valuations tends to result in weaker returns going forward. While this is the most probable outcome, it remains uncertain. However, Gilani’s recommendations go beyond just suggesting that investors buy into the market in anticipation of a Trump victory. He is providing specific investment strategies aimed at capitalizing on potential “Shockwaves” that could follow a second Trump presidency.
Gilani’s picks focus on sectors where he believes market conditions will align with the political landscape, particularly if Trump were to win. Considering the current dynamics of the energy sector, Gilani seems to be betting on companies that stand to benefit from a less restrictive regulatory environment under Trump. Here’s an overview of his key recommendations:
- Oil, Gas: Despite the rhetoric around climate change and energy efficiency, the US has set production milestones in 2023. With both presidential candidates supporting natural gas output along with fracking in Pennsylvania, Gilani sees oil and gas as a critical sector for growth. He may recommend companies positioned to capitalize on this trend.
- Electric Vehicles (EVs): While Biden is a strong advocate for EVs via state-driven incentives, Gilani might point out the potential for traditional automakers to outperform in a less-regulated market, especially if Trump were to ease mandates on EVs. The influence of major players like Elon Musk, who supports Trump, could shape this industry’s future.
- Energy Infrastructure: Despite the government’s push for green energy, Gilani might highlight companies within the energy infrastructure space, particularly those involved in traditional energy sources or those adapting to the transition between fossil fuels and renewables.
While he may focus on stocks in these sectors, the underlying theme is that Gilani believes a market under Trump could benefit from less regulatory pressure, particularly in oil and gas, and more flexibility in sectors like EV production. His picks are likely geared toward companies with strong fundamentals and potential upside from changes in policy direction.
In the deep-sea drilling industry, some companies like SBM Offshore have started pivoting toward the growing marine wind facility sector. However, most still follow the classic cycle of highs and lows drilling model, which has both thrilled, bankrupted investors. Companies such as Transocean, Seadrill, and Noble Corp (after acquiring Diamond Offshore) are prime examples of this pattern, with fluctuating operations and financial outcomes due to the volatility of oil prices. Despite this, these offshore drilling firms still maintain large backlogs, such as Transocean with a backlog of $8,900 million, Seadrill with approximately $2,500 million, and Noble Corp with $6,700 million, indicating some level of stability in the long run, although lower oil prices have dampened interest in expanding offshore drilling projects.
One notable company is Valaris, which emerged from bankruptcy in 2021 following the consolidation of Ensco, Rowan. The restructuring of its debt has allowed Valaris to reset its balance sheet, and its backlog now stands at $4.3 billion. This makes Valaris an attractive option, especially given the potential for a rebound in oil prices. However, with offshore drillers, the relationship between oil prices and stock performance is clear: when crude prices rise, the demand for drilling rigs tends to increase, driving up the stock value.
Noble Corp. currently trading at around seven times its trailing earnings, 10 times its forward earnings, offering dividend yield approximately 6%. For companies like this, the key factors are oil prices (which they hope will rise), interest rates (which they hope will fall). No matter who takes office as the next President possesses a significant impact on these factors remains uncertain, and only time will tell what the true influence will be.
An interesting paradox in the deep-sea drilling sector is that a “Drill, baby, drill” initiative in the U.S. could actually harm offshore drilling companies in the long run. Increased supply could potentially push oil, gas prices down, reducing the profitability of these companies. However, as is often the case in energy markets, the situation is far from simple, with a web of interconnected factors influencing the outcomes.
Looking ahead, there are more nuances to explore, but one thing seems clear: while presidential policies may provide short-term shifts, the dynamics of the oil industry are deeply tied to broader market forces.
The third company Gilani likely recommends is Nucor (NUE). Nucor, like Steel Dynamics, focuses on recycling, efficiency through electric arc furnaces along with compact mills, positioning itself as an industry leader in sustainability. Although Nucor has grown at a slower pace compared to Steel Dynamics, it’s one of the largest and most efficient metal manufacturers within the U.S. Nucor has been praised for its solid balance sheet and ability to weather steel price fluctuations with more stability.
While Nucor shares similarities with Steel Dynamics, it stands out for its diversified product line, including higher-end steel products, which gives it an edge in some niche markets. Still, like STLD, Nucor’s performance is cyclical and heavily tied to demand for end products in industries like automotive and construction, which can make it vulnerable during downturns. Despite some challenges in the steel market, Nucor’s solid reputation and potential for long-term growth make it an attractive pick, particularly for those seeking exposure to U.S. steel production.
In the broader context of steel producers, while international players like ArcelorMittal (MT) face challenges due to steel dumping and flat market performance, Nucor and Steel Dynamics are expected to fare better because of their strong domestic positions and focus on cost-effective, environmentally conscious production methods.
Given the context of Carrier Global, it’s clear that the company’s role in Trump’s agenda and its growth potential through data center construction and HVAC systems does make it an interesting player in the “energy, industrial” sectors. However, the question remains whether the Trump presidency would directly benefit the stock in the long run, particularly considering past offshoring disputes and the rising costs of manufacturing in the U.S.
As for what else Gilani might be teasing, his focus on companies tied to energy, industrial sectors points to potential plays on infrastructure and green energy. One possibility could be Caterpillar Inc., a global leader in heavy machinery and equipment for construction and mining. With the potential for an infrastructure boom, particularly in the U.S. under Trump, Caterpillar could benefit from increased demand for construction equipment, paving the way for significant stock growth.
Additionally, ExxonMobil or Chevron might also make an appearance, as Gilani may be betting on a rebound in oil and gas prices if Trump pushes for more energy independence and offshore drilling. These large-cap oil majors are well-positioned to capitalize on high energy prices, especially if there’s increased demand for fossil fuels.
Finally, another strong contender could be L3Harris Technologies, a company that provides aerospace and defense technology. With Trump’s history of bolstering military spending, defense contractors could see continued expansion in case of a push for increased defense budgets. L3Harris has been expanding its influence in the defense sector, and with the geopolitical tensions that often arise during Trump’s leadership, this could be a high-growth area for investors.
In summary, while Carrier Global might be a notable player in the HVAC space, Gilani’s recommendations could likely expand to other companies benefiting from potential infrastructure spending, a rebound in energy prices, and defense-related growth during Trump’s presidency. The “Trump Shockwave” might touch several sectors, but it seems that Gilani is particularly focusing on those that align with Trump’s policies on manufacturing, energy, and industrial expansion.
And which companies stand to gain from these grand commitments? Here’s more from the adv…
That is Leonardo DRS, a U.S. company that is approximately 80% owned by Italian defense giant Leonardo. The company presents itself as follows:
It seems like the focus is on the defense sector, where Leonardo DRS and other companies as Huntington Ingalls, General Dynamics, Textron, and L3Harris all have roles, though their performance and growth prospects vary.
For those interested in smaller contractors like Leonardo DRS, the appeal lies in its potential 15% yearly profit increase. However, at a 32X forward earnings multiple, it is on the higher end of valuation, which could be seen as risky given its volatility tied to fluctuating contracts. Larger, more established contractors like Huntington Ingalls, General Dynamics, and Textron may offer more stability but come with slower growth and potentially lower returns in the short term. The benefit here is their long-term contracts, which offer more predictable earnings and lower valuations, making them less risky.
L3Harris, on the other hand, is another strong player in the electronics and defense systems space. Though not a pure prime contractor, its acquisition spree throughout the years has solidified its position in the defense sector. Featuring a greater attractive 19 times forward earnings multiple, L3Harris presents itself as a more affordable alternative to Leonardo DRS for investors looking for stability with moderate growth.
For those looking beyond electronic systems, companies like Northrop Grumman or Lockheed Martin could be of interest, as both are significant players in the defense industry with a broader portfolio of products ranging from aircraft and missiles to satellites. Their scale and diversified offerings might present a balanced mix of growth and stability with higher valuations, but their extensive government contracts provide a solid base for earnings.
Lastly, BAE Systems, a British defense contractor, could also be a good addition to the mix. While primarily focused outside of the U.S., it has a strong presence in international defense contracts and could be a hedge against geopolitical risks, offering opportunities for growth in international defense spending.
In short, for those willing to take on a bit more risk with smaller, fast-growing contractors, Leonardo DRS could fit the bill, but for stability and long-term growth, larger contractors like L3Harris, Huntington Ingalls, or General Dynamics might provide a more balanced approach. The key is to consider the balance of growth potential, valuation, and stability when selecting within this sector.
There are numerous companies that could fit the bill, including major players in defense, aerospace, and semiconductor industries. Some examples are Leidos, RTX, and L3Harris, alongside NXP Semiconductor and Elbit Systems. This is not a comprehensive list, as many other companies could potentially be included, but without further details, it’s hard to narrow down exactly which ones Gilani might be referring to. Let’s move on for now.
The company likely referenced in the text is AeroVironment (AVAV), a leader in drone technology and a key player in the U.S. defense sector. Known for its specialization in military drones, AeroVironment stands out from other defense contractors due to its strong focus on unmanned aerial systems. During Donald Trump’s presidency, AeroVironment’s stock saw substantial growth, rising by 420% between January 20th, 2017, and January 20th, 2021, which suggests that investors were confident in the company’s future prospects during that period.
Currently, analysts expect AeroVironment (AVAV) to grow its earnings by 15-20%, but its stock is priced at a high multiple—over 60 times its forward earnings. For some investors, this may appear overly expensive, but for those particularly interested in the military drone sector, AeroVironment remains the go-to company. As demand for drones continues to increase, especially with ongoing advancements in military technologies, the company’s prospects may continue to shine despite the high valuation.
The discussion also touches upon the potential influence of political changes on the cryptocurrency market, particularly under a Trump. The belief is that Trump’s administration might adopt a more lenient approach to cryptocurrency regulation compared to the more stringent stance currently taken by the SEC under Biden’s administration, led by Gary Gensler. Speculation around how a shift in Washington’s attitude could impact the crypto market suggests that a pro-crypto stance could rejuvenate investor sentiment. Cryptocurrencies, including Bitcoin, witnessed substantial growth during Trump’s first term due to limited regulation, and a similar environment could support a resurgence in the sector.
However, given the market volatility and the evolving regulatory landscape, it’s important to recognize that the future of cryptocurrencies remains uncertain. The recent downturn, following the 2022 tech market slump and the FTX controversy, serves as a reminder of the inherent risks involved. If the SEC takes a more hands-off approach, there may be opportunities for growth, but it’s difficult to predict with certainty what the future holds for the crypto market.
In conclusion, the article presents several stocks, particularly within the power sector, industrials, defense sectors, that could take advantage of the political “shockwave” of a potential second Trump term. While there is optimism in the market, the true impact of such a shift remains speculative, and investors should continue to monitor developments closely.
