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On Tuesday, markets celebrated one of the best sessions in months. Gains came on the back of reports that Trump’s core team had taken crucial steps toward framing a tax reforms package. Skepticism over chances of such proposals gaining legislative passage continues to exist. But investors seem to be clued in on the idea, since its one they haven’t priced in yet.
If such tax reforms are indeed implemented, one of the key beneficiaries would be companies with substantial overseas cash reserves. Trump has promised to offer such companies a lower one-time rate on their offshore earnings. Investing in leading companies which are part of the S&P 500 and set to gain from this proposal surely makes for a smart move at this point.
Focus Shifts to Tax Reform
A Politico magazine article on Tuesday claimed that President Trump, his close associates and his legislative leadership have made substantial progress toward framing tax reform proposals. Several options related to both individual and business taxation are being discussed at this point. These include proposals to impose restrictions on deductions for mortgage interest payments and abolish interest deductions for businesses.
New proposals are also likely to propose deductions for investments made by small businesses on new facilities and equipment. Of course, a great degree of skepticism exists about the Trump administration’s ability to push through such a plan. The White House continues to deal with a raft of controversies, the most recent of which is Trump’s heavily criticized response to the events at Charlottesville.
Corporate Tax Proposals at an Advantage
Strategas Research Partners’ head of policy Daniel Clifton believes that more progress has been made on proposals related to corporates. Clifton hinted that rules for individuals may not see much tinkering at this stage, with a mortgage deduction proposal likely to be excluded. Instead a lower rate of corporate tax is likely to be put forward. This would apply to both domestic and overseas earnings.
Additionally, deductions for foreign companies with U.S. operations on items such as rent and interest are likely to be abolished. The idea behind new corporate proposals is to cut existing rates and counterbalance such a move by doing away with deductions. Clifton added that there have been discussions around abolishing interest deductions on corporate debt as well. But he believed that ultimately only a small cut in the amount that may be deducted may come about.
Companies with Overseas Reserves to Benefit
At this stage, reports and discussions around tax reforms on overseas profits center on a cut in rates. But what had caught investor imagination at a point earlier in the year, and is likely to do so again, is Trump’s proposal of “deemed repatriation” rates. Such a proposal envisioned a one-time rate of 10% on overseas earnings, far lower than the 35% rate which would normally apply.
Cash repatriated in such a manner could be utilized for the purposes of dividends, buybacks, capital expenditure and acquisitions. The most prominent beneficiaries of such a proposal would be tech behemoths from the U.S. According to Bloomberg, Microsoft Corporation (MSFT - Free Report) , Cisco Systems, Inc. (CSCO - Free Report) and Apple Inc. (AAPL - Free Report) alone hold a combined $427 billion of cash overseas.
Our Choices
The proposal to offer an attractive one time rate or even a lower rate of tax on overseas cash reserves is likely to benefit a number of companies. Those with the largest cash piles stand to gain the most of course. The likely impact of such a proposal can be gleaned from the fact that the top 50 overseas cash hoarders from the S&P 500 together hold $925 billion overseas, according to Bloomberg.
This is nearly $118 billion more than the amount held a year ago. Picking stocks from the S&P 500 likely to gain from such a proposal makes for a profitable option at this point. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
NVIDIA Corporation (NVDA - Free Report) posted impressive second-quarter fiscal 2018 results and provided encouraging third-quarter revenue guidance. It features at number 27 on the Bloomberg list and holds $4.6 billion in cash overseas.
NVIDIA has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 40.1% for the current year. Its earnings estimate for the current year has improved by 16.8% over the last 30 days.
Caterpillar Inc. (CAT - Free Report) reported a 12% rise in sales in July, its best performance so far in 2017. It features at number 18 on the Bloomberg list and holds $7.7 billion in cash overseas.
Caterpillar has expected earnings growth of 52.7% for the current year. Its earnings estimate for the current year has improved by 20.9% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intel Corporation’s (INTC - Free Report) second-quarter 2017 results demonstrated the company’s growing focus on the data-centric part of the business. It features at number 13 on the Bloomberg list and holds $14.2 billion in cash overseas.
Intel has a Zacks Rank #2 (Buy). The company has expected earnings growth of 9.8% for the current year. Its earnings estimate for the current year has improved by 4.4% over the last 30 days.
PepsiCo Inc. (PEP - Free Report) beat earnings estimates in each of the trailing four quarters. Estimates are also trending upward for the last 60 days for 2017 and 2018. It features at number 12 on the Bloomberg list and holds $15.5 billion in cash overseas.
Pepsi has a Zacks Rank #2. The company has expected earnings growth of 6.3% for the current year. Its earnings estimate for the current year has improved by more than 0.4% over the last 60 days.
Oracle Corp. (ORCL - Free Report) delivered strong fourth-quarter 2017 results. Its top-line growth benefited from ongoing cloud-based momentum. It features at number 5 on the Bloomberg list and holds a whopping $52.2 billion in cash overseas.
Oracle has a Zacks Rank #2. The company has expected earnings growth of 8.8% for the current year. Its earnings estimate for the current year has improved by 0.6% over the last 30 days.
4 Surprising Tech Stocks to Keep an Eye on
Tech stocks have been a major force behind the market’s record highs, but picking the best ones to buy can be tough. There’s a simple way to invest in the success of the entire sector.
Zacks has just released a Special Report revealing one thing tech companies literally cannot function without. More importantly, it reveals 4 top stocks set to skyrocket on increasing demand for these devices. I encourage you to get the report now – before the next wave of innovations really takes off.
Image: Bigstock
5 S&P 500 Stocks to Profit from Trump's Tax Plan
On Tuesday, markets celebrated one of the best sessions in months. Gains came on the back of reports that Trump’s core team had taken crucial steps toward framing a tax reforms package. Skepticism over chances of such proposals gaining legislative passage continues to exist. But investors seem to be clued in on the idea, since its one they haven’t priced in yet.
If such tax reforms are indeed implemented, one of the key beneficiaries would be companies with substantial overseas cash reserves. Trump has promised to offer such companies a lower one-time rate on their offshore earnings. Investing in leading companies which are part of the S&P 500 and set to gain from this proposal surely makes for a smart move at this point.
Focus Shifts to Tax Reform
A Politico magazine article on Tuesday claimed that President Trump, his close associates and his legislative leadership have made substantial progress toward framing tax reform proposals. Several options related to both individual and business taxation are being discussed at this point. These include proposals to impose restrictions on deductions for mortgage interest payments and abolish interest deductions for businesses.
New proposals are also likely to propose deductions for investments made by small businesses on new facilities and equipment. Of course, a great degree of skepticism exists about the Trump administration’s ability to push through such a plan. The White House continues to deal with a raft of controversies, the most recent of which is Trump’s heavily criticized response to the events at Charlottesville.
Corporate Tax Proposals at an Advantage
Strategas Research Partners’ head of policy Daniel Clifton believes that more progress has been made on proposals related to corporates. Clifton hinted that rules for individuals may not see much tinkering at this stage, with a mortgage deduction proposal likely to be excluded. Instead a lower rate of corporate tax is likely to be put forward. This would apply to both domestic and overseas earnings.
Additionally, deductions for foreign companies with U.S. operations on items such as rent and interest are likely to be abolished. The idea behind new corporate proposals is to cut existing rates and counterbalance such a move by doing away with deductions. Clifton added that there have been discussions around abolishing interest deductions on corporate debt as well. But he believed that ultimately only a small cut in the amount that may be deducted may come about.
Companies with Overseas Reserves to Benefit
At this stage, reports and discussions around tax reforms on overseas profits center on a cut in rates. But what had caught investor imagination at a point earlier in the year, and is likely to do so again, is Trump’s proposal of “deemed repatriation” rates. Such a proposal envisioned a one-time rate of 10% on overseas earnings, far lower than the 35% rate which would normally apply.
Cash repatriated in such a manner could be utilized for the purposes of dividends, buybacks, capital expenditure and acquisitions. The most prominent beneficiaries of such a proposal would be tech behemoths from the U.S. According to Bloomberg, Microsoft Corporation (MSFT - Free Report) , Cisco Systems, Inc. (CSCO - Free Report) and Apple Inc. (AAPL - Free Report) alone hold a combined $427 billion of cash overseas.
Our Choices
The proposal to offer an attractive one time rate or even a lower rate of tax on overseas cash reserves is likely to benefit a number of companies. Those with the largest cash piles stand to gain the most of course. The likely impact of such a proposal can be gleaned from the fact that the top 50 overseas cash hoarders from the S&P 500 together hold $925 billion overseas, according to Bloomberg.
This is nearly $118 billion more than the amount held a year ago. Picking stocks from the S&P 500 likely to gain from such a proposal makes for a profitable option at this point. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
NVIDIA Corporation (NVDA - Free Report) posted impressive second-quarter fiscal 2018 results and provided encouraging third-quarter revenue guidance. It features at number 27 on the Bloomberg list and holds $4.6 billion in cash overseas.
NVIDIA has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 40.1% for the current year. Its earnings estimate for the current year has improved by 16.8% over the last 30 days.
Caterpillar Inc. (CAT - Free Report) reported a 12% rise in sales in July, its best performance so far in 2017. It features at number 18 on the Bloomberg list and holds $7.7 billion in cash overseas.
Caterpillar has expected earnings growth of 52.7% for the current year. Its earnings estimate for the current year has improved by 20.9% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intel Corporation’s (INTC - Free Report) second-quarter 2017 results demonstrated the company’s growing focus on the data-centric part of the business. It features at number 13 on the Bloomberg list and holds $14.2 billion in cash overseas.
Intel has a Zacks Rank #2 (Buy). The company has expected earnings growth of 9.8% for the current year. Its earnings estimate for the current year has improved by 4.4% over the last 30 days.
PepsiCo Inc. (PEP - Free Report) beat earnings estimates in each of the trailing four quarters. Estimates are also trending upward for the last 60 days for 2017 and 2018. It features at number 12 on the Bloomberg list and holds $15.5 billion in cash overseas.
Pepsi has a Zacks Rank #2. The company has expected earnings growth of 6.3% for the current year. Its earnings estimate for the current year has improved by more than 0.4% over the last 60 days.
Oracle Corp. (ORCL - Free Report) delivered strong fourth-quarter 2017 results. Its top-line growth benefited from ongoing cloud-based momentum. It features at number 5 on the Bloomberg list and holds a whopping $52.2 billion in cash overseas.
Oracle has a Zacks Rank #2. The company has expected earnings growth of 8.8% for the current year. Its earnings estimate for the current year has improved by 0.6% over the last 30 days.
4 Surprising Tech Stocks to Keep an Eye on
Tech stocks have been a major force behind the market’s record highs, but picking the best ones to buy can be tough. There’s a simple way to invest in the success of the entire sector.
Zacks has just released a Special Report revealing one thing tech companies literally cannot function without. More importantly, it reveals 4 top stocks set to skyrocket on increasing demand for these devices. I encourage you to get the report now – before the next wave of innovations really takes off.
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