On Friday, Donald J. Trump was sworn in as the 45th president of the U.S., an event which evoked strong reactions from both the country and the world. Promising to put “America First,” the president pledged to put an end to what he termed as the “American carnage” of rusted factories across the countries. Among his first actions on assuming office was a formal withdrawal from the Trans-Pacific trade Partnership.
This is a clear indication that the President does, in fact, intend on following through on many of his campaign promises even at the cost of causing great alarm to the world at large. At this point, it does make good sense to invest in domestic focused U.S. stocks which may be ideally suited to combat any volatility investors may encounter in the days ahead.
Exiting the Trans-Pacific Partnership
Almost immediately, the President has set about fulfilling his agenda. On Monday, Trump enacted the formal withdrawal of the U.S. from the Trans-Pacific Partnership. This was one of his key campaign promises and could create friction between the U.S. and its Asian allies. Trump has said that he wants to promote U.S. manufacturing and will now seek to conclude one to one trade deals which could be ended within a short period if necessary.
This is in keeping with a feeling among several U.S. citizens that trade deals of this nature have had a detrimental effect on the U.S. job market. Trump also met with U.S. industry heavyweights at the White House on Monday, promising to implement measures which will benefit domestic production and business.
At the same time, he warned that companies moving production abroad would have to face heavy penalties. Trump talked about enforcing a stiff border tax on products which come in from other countries.
Encouraging Domestic Industry
Trump also told the gathering of CEOs, which included the chief executives of Ford (F - Free Report) and Tesla (TSLA - Free Report) that he intends to reduce U.S. corporate taxes to within 15%-20%. This is a major cut considering that the current tax level is at 35%. Additionally, such a move would require the assent of the U.S. Congress, which of course is currently Republican dominated.
Meanwhile, business leaders emphasized that the need to reduce regulations was even more important in their view. Speaking to the gathering, Trump said that he believed that regulations could be reduced by 75% or more.
Previously, Trump has said he is in favor of beefing up public spending by hundreds of billions of dollars on infrastructure. In fact, he has proposed $1 trillion infrastructure spending financed by new tax credits to goad private equity investors. Increased outlays will be aimed at improving roads, bridges and telecommunications. (Read: Welcome Trump Era with These ETFs)
President Trump has promised to bring jobs back to America, in particular those related to manufacturing. However, this may not be an easy process and certainly not a quick one. What is certain is that he has put the focus squarely back on economic activity within the country. In such an event it would a good idea to invest in sectors which are intrinsically linked to the domestic sector.
In this case, stocks from the utilities, healthcare, real estate and financial services sector would be good choices. They would also make for safe options in the event of short term volatility. However, picking winning stocks may prove to be difficult.
This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.
Spark Energy, Inc. (SPKE - Free Report) provides residential and commercial customers across the United States with an alternative choice for their natural gas and electricity.
Spark Energy has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. The company has expected earnings growth of 25.5% for the current year. Its earnings estimate for the current year has improved by 0.5% over the last 30 days. The stock has returned 15% since Nov 8, outperforming the Zacks Utility - Electric Power sector, which has lost 1.1% over the same period.
Investar Holding Corporation (ISTR - Free Report) is a bank holding company for Investar Bank which offers banking services and products to individuals and companies.
Investar Holding has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of 11.6% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 15.68, lower than the industry average of 17.24. The stock has returned 22.5% since Nov 8, underperforming the Zacks Banks - Southeast sector, which has gained 25.3% over the same period. This provides a good opportunity to buy the stock given that there is significant upside potential.
CoreCivic, Inc. (CXW - Free Report) is a REIT which provides correctional, detention and residential reentry facilities.
CoreCivic has a VGM Score of B. The stock has a P/E (F1) of 12.97, lower than the industry average of 14.41. Its earnings estimate for the current year has improved by 7.1% over the last 30 days. The stock has returned 99.7% since Nov 8, outperforming the Zacks REIT And Equity Trust - Other sector, which has gained 25.3% over the same period. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Premier, Inc. (PINC - Free Report) along with its subsidiaries is a U.S. based healthcare improvement company.
Premier has a Zacks Rank #1 and a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. The company has expected earnings growth of 3.3% for the current year. The stock has returned 8% since Nov 8, outperforming the Zacks Medical Services sector, which has gained 4.3% over the same period.
Taylor Morrison Home Corp. (TMHC - Free Report) is a homebuilder and land developer engaged in building single-family detached and attached homes for first-time buyers.
Taylor Morrison Home has a Zacks Rank #2 (Buy) and a VGM Score of A. The company has expected earnings growth of 17.5% for the current year. The stock has returned 11.4% since Nov 8, outperforming the Zacks Building Products - Home Builders sector, which has gained 7.1% over the same period.
Zacks' Top 10 Stocks for 2017
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