Back to top

Why It's Worth Watching Donald Trump's Stock Portfolio

Read MoreHide Full Article

So it wasn't Warren Buffett or Carl Icahn coming up with a bold market prediction this time, but Presidential hopeful Donald Trump -- he was suggesting investors not sell after the big downturn. Eventually, he was proved prescient after the markets posted record intra-week reversals.

“You’re better off holding,” Trump advised. He did mention that a historical trend is for the market is to rebound after a nosedive. Markets went on to post record intra-week reversals for the week ending Aug 28.

While market routs do lead to panic selling, it also takes guts to know if a portfolio should be offloaded during the downturn. Perhaps Trump had the foresight this time, as he said he had the feeling things were bad. Trump said he had indeed offloaded much of portfolio before the stock market rout.

This one incident of right prediction may not directly win him votes, but this does make us interested in looking at Donald Trump the investor.

Donald Trump, Billionaire Investor

A 92-page Trump financial document that was released by the Federal Election Commission showed Trump’s net worth was over $10 billion as of Jun 30. Trump has a minimum of $70 million invested in stocks. Trump had entered the stock investment arena in 2011 following disappointment from depressed American real estate market. He profited from 40 of the 45 stocks he purchased, which he sold in 2014.

It’s almost a 90% success rate, and on top of that Trump earned millions in dividends as well. The biggest gainers in his portfolio were Bank of America Corporation BAC, The Boeing Company (BA - Free Report) and Facebook, Inc. FB. He earned $6.7 million, $3.96 million and $3.85 million, respectively, from them.

On the other hand, DR Horton Inc. DHI lost him over $204,000, while Trump lost more than $121,000 in Occidental Petroleum Corporation (OXY - Free Report) and $82,000 in Enbridge Inc. ENB. Reportedly, Trump had earned more than $27 million from stock sales in 2014.

Trump’s 11 Stock Picks

An analysis in NationalJournal says that Donald Trump would be even richer today if he had just put his inheritances in 1974 into the stock market. But this is hypothetical; what Trump did in reality earned him big money from stock sales and dividends.

Below we present 11 stocks that emerged as the most prominent ones from the disclosure. However, Trump had later mentioned he has sold many of his stocks and we do not have information on which ones he sold.

Apple Inc. (AAPL - Free Report) has a dividend yield of 1.84%. Trump has earned a dividend return of $15,000 to $50,000 in the reporting period. Currently carrying a Zacks Rank #3 (Hold), Apple’s key growth catalyst in fiscal 2015 and beyond remains the strong sales of the new iPhones (6 and 6 plus).

Aug 21 – 25 (Market Rout): -7.9%
Aug 26 – 28 (rebound): 9.2%

Altera Corp.’s (ALTR - Free Report) acquisition by Intel Corporation should have helped Trump earn big bucks. Intel will acquire Altera in an all-cash deal worth $16.7 billion or $54 per share. Altera, carrying a Zacks Rank #3, has a consistent record of returning cash to shareholders through share repurchase and dividend payouts. In the first half of 2015, Altera repurchased stocks worth $57.5 million and paid dividend of $108.4 million.

Aug 21 – 25: -5.1%
Aug 26 – 28: 4.5%

IBM Corporation’s (IBM - Free Report) dividend yield of 3.64% combined with PE of 9.05x make it a value investment. From 2000 to 2014, IBM has returned approximately $156 billion to shareholders in the form of dividends and share repurchases. In the last six months, IBM returned about $2.4 billion in dividends to its investors and $2.3 billion in share repurchases.

Aug 21 – 25: -7.7%
Aug 26 – 28: 4.8%

Bristol-Myers Squibb Company (BMY - Free Report) helped Trump earn $50,000 in dividends. Bristol-Myers boasts a robust pipeline. The successful development of the pipeline would boost the stock. Bristol-Myers has a dividend yield of 2.54%.

Aug 21 – 25: -8.2%
Aug 26 – 28: 4.6%

AT&T, Inc. (T - Free Report) is the second largest provider of wireless services in North America and one of the world’s leading communications service carriers. Trump earned $15,000 to $50,000 in dividends from AT&T. AT&T carries a Zacks Rank #2 (Buy) and also carries favorable forward price to earnings ratio (P/E) of 12.27 as compared to industry average of 41.90. Recently, the company scaled up to the highest position in the U.S. pay-TV market with the acquisition of DIRECTV.

Aug 21 – 25: -6.3%
Aug 26 – 28: 4.7%

Verizon Communications Inc. (VZ - Free Report) has a strong foothold in the wireless market and expects growth from higher penetration of devices and increasing market penetration of 4G LTE services. Trump owned at least $500,000 in Verizon stock and his dividend income was between $15,000 and $50,000. Its dividend yield is 4.9%.

Aug 21 – 25: -8.4%
Aug 26 – 28: 5.8%

JPMorgan Chase & Co.’s (JPM - Free Report) reduced operating expenses and low legal expenses aided results. JPMorgan continues to enhance shareholder value through share repurchases and dividend payouts. As part of the capital plan approved by the Fed, JPM will be repurchasing $6.4 billion worth shares through the second quarter of 2016. It has a dividend yield of 2.86%.

Aug 21 – 25: -9.1%
Aug 26 – 28: 7%

Kinder Morgan, Inc. KMI is the largest energy infrastructure company in North America with an enterprise value of over $130 billion. Kinder Morgan had lost 11.7% during Aug 21-25 but gained 8.8% from Aug 26 – 28. Kinder Morgan has an impressive dividend yield of 6.24%, but surprisingly Trump did not mention Kinder Morgan’s dividend income. However, the financial disclosure showed that Trump made capital gain between $100,000 and $1 million from Kinder Morgan.

Aug 21 – 25: -11.7%
Aug 26 – 28: 8.8%

Energy Transfer Partners, L.P. (ETP - Free Report) has a dividend yield of 8.6% proving the company to be all about consistent stream of income. Energy Transfer Partners has been consistently returning value to its unit holders though distributions, making it attractive for those looking for a steady income source. The partnership increased its second-quarter 2015 payout by $0.02 to $1.035 per unit.

Aug 21 – 25: -8.4%
Aug 26 – 28: 8.2%

ConocoPhillips (COP - Free Report) has been a bad investment this year, though this owes to the slump that crude prices continued. ConocoPhillips is down 28.8% year to date. The dividend yield, however, is an impressive 6.2%.

Aug 21 – 25: -15.2%
Aug 26 – 28: 10.9%

Caterpillar Inc. (CAT - Free Report) is another stock that has been suffering this year and its year-to-date loss is 16.5%. Its second-quarter earnings per share decreased 25%. However, the dividend yield is impressive 4.11%. Caterpillar plans to repurchase approximately $1.5 billion of its common stock during the third quarter of 2015.

Aug 21 – 25: -8.2%
Aug 26 – 28: 5.4%

Our Take

Trump’s portfolio looks like a mixed bag. It does have the quality of diversity with behemoths from industries including Technology, Pharma, Telecom, Banking and Energy. This is something we strongly recommend – a diversified portfolio.

Trump also seems to trust the large caps more. This too is a safe move as large caps provide the least amount of risk. Along with picking the large caps, Trump also put his bet on prominent names. Apple has grown from strength to strength and is among the largest components in its listed index. JPMorgan is among the Big Five and his telecom picks are surely the leaders in their arena.

Most importantly, Trump has dividend stocks in his portfolio. Dividend would ensure a consistent stream of income, offsetting loss incurred from stock depreciation.

We are not sure when Trump picked up Altera, but if he was aware of the possibility of the upcoming acquisition, then it surely was a great pick. A takeover deal is approved when investors get a premium over the current market price of the company to be acquired.

Investors may or may not vote for Trump. However, take his advice and remember to have a well diversified, low risk and dividend paying stocks in your portfolio.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

More from Zacks Analyst Blog

You May Like