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Supriyo Bose

3 Stocks to Watch After Donald Trump's Debate Performance


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Last night, the first of the three presidential debates witnessed a high-octane face-off between Democrat ex-Secretary of State Hillary Rodham Clinton and Republican Donald Trump. As the discussions traded barbs and skeptical anecdotes, it displayed two starkly different personalities and their visions for the nation.   

The debate also served as a precursor to the likely changes in the framework of the government policies and offered a broader hint to the impending changes in the financial markets as a whole and the stock market in particular. Investors across the globe have already started to weigh the pros and cons from the one-on-one political rendezvous to fathom its effect on various industries. Let us also take a closer look at the broad takeaways from the debate to identify potential game-winning stocks, should Trump emerge as the victorious candidate in the Presidential election.

Focus on Defense

In order to combat the barbaric terrorist acts and radical extremist groups like the Islamic State, Trump has urged to increase the defense expenditure for a bigger Army and Marine Corps, improved missile defense systems and more ships and fighter jets. At the same time, he has pledged to end the across-the-board budget cuts known as sequester to increase funding for future defense needs.

Trump is widely viewed as not being risk averse and is likely to advocate an aggressive foreign policy that showcases military strength. Such an oblique reference was also made in the debate when Clinton highlighted the episode wherein Trump wanted the U.S. forces to fire on Iranian boats that had taunted them.

In such a scenario, high-tech defense and aerospace equipment manufacturers like AAR Corp. (AIR - Analyst Report) are likely to benefit in the long run. Wood Dale, IL-based AAR Corp. provides various products and services to the aviation and defense industries worldwide. This Zacks Rank #1 (Strong Buy) stock has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cyber Security Threats

Despite several disagreements, both Trump and Clinton were unanimous in their concerns for cyber security threats faced by the country. The U.S. federal government is arguably the largest producer, collector, consumer and disseminator of data in the world. This makes government contractors ideal targets for cyber attacks as they are entrusted with sensitive information related to national security secrets, military and critical infrastructure, and personal information of all U.S. citizens and residents.

The incessant cyber attacks and related security risks offer a great investment proposition for the global cyber security market. In addition, a broad proliferation of smartphones and other hand-held devices make cyber security threats a potent weapon for businesses. While cyber security spending by federal agencies will mostly revolve around the development of cyber weapons, cyber defense products and services, corporate firms will primarily seek to develop technologically robust products and services for the IT domain and equipment. This would include continuous upgrade of technology and skills to counter technological obsolescence.
Consequently, cyber security stocks like Carbonite, Inc. (CARB - Snapshot Report) gain immense prominence. Headquartered in Boston, MA, Carbonite is a leading provider of hybrid backup and recovery solutions for businesses. This Zacks Rank #1 stock offers a comprehensive suite of affordable services for data protection, recovery and anywhere, anytime access. Carbonite has long-term earnings growth expectation of 30%.

Stress on Fossil Fuels

During the debate, Trump made an oblique reference to the now-bankrupt solar company Solyndra and termed the federal investment in it as a failure. Earlier in his campaign, Trump had promised to repeal a host of energy and environmental regulations, save the coal industry and lift restrictions on energy sales. Specifically, he vouched to repeal the Environmental Protection Agency rules that limit carbon emissions from power plants, known as the Clean Power Plan; the EPA’s Waters of the U.S. rule, which brings more water bodies under federal protection; and an Interior Department moratorium on new coal leasing on federal lands.

Although such promises are challenging to fulfill, they have given a fresh lease of life to the beleaguered coal industry stocks like Hallador Energy Company (HNRG - Snapshot Report) . Based in Denver, CL, Hallador is engaged in the mining, production, and sale of steam coal for the electric power generation industry in the U.S. This Zacks Rank #1 stock has a VGM score of B.

Moving Forward

Scott Fidel, an analyst of Credit Suisse, perfectly summed up: "Investors often tend to fear the unknown more than anything else. In the 2016 elections, Donald Trump represents the specter of the unknown to a larger degree than any leading presidential candidate in our lifetime." Nevertheless, various presidential campaigns and debates have offered a broad overview of the policy framework of Trump and its likely effect on various industries. Until a clearer picture emerges in the future, investors could be well off if they invest in these stocks that are backed by a solid Zacks Rank and healthy fundamentals.

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