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It’s never too early for investors to start preparing for when Donald Trump takes the oath of office on Jan. 20.
When it became clear that Trump would win the presidency, the stock market initially crashed. Since then, it has rebounded nicely. Everyone is trying to get their head around what a Trump presidency means for the market.
Trump has some aggressive plans for economic growth, about which many have raised questions — including Warren Buffett. However, even Buffett is giving him the benefit of the doubt.
Buffett noted, “I support any president of the United States. It’s very important that the American people coalesce behind the president . . . he deserves everybody’s respect.”
Others say the new administration will benefit the market. The “bond king” Jeff Gundlach of DoubleLine Capital has said that the Trump win would be a positive for both stocks and bonds given higher inflation.
Many major investment firms predicted stocks would drop if Trump won. What they didn’t expect was a fast rebound. With that in mind, the best way to hedge a Trump presidency is to pick stocks that are likely to “win,” in the environment of a new administration, regardless of whether Trump comes through on a particular part of his plan.
Here are the best stocks for a Trump presidency:
Best Trump Stocks No. 1: General Dynamics (NYSE: GD)
Defense stocks are expected to thrive under a Trump administration. General Dynamics is still the cheapest pure-play defense contractor. It trades at less than 17 times next year’s earnings and pays a solid 1.8% dividend yield. Its upped its dividend for 18 straight years.
General Dynamics has a history of generating solid returns as well, with a return on equity north of 25%. Its stronghold on the aerospace industry is impressive; it manufactures Gulfstream and F-16 jets. More military spending, as Trump has promised, is great for General Dynamics and its jet and tank businesses.
Best Trump Stocks No. 2: Chicago Bridge & Iron (NYSE: CBI)
With Republicans sweeping the election, winning the White House and Congress, the idea is that infrastructure spending is front and center. Infrastructure has long been a big part of Trump’s plan; he promised a $1 trillion infrastructure bill.
Chicago Bridge & Iron is a construction company that should do well under Trump. It pays a 0.9% dividend yield and shares are down 26% over the last year. It’s now one of the cheapest plays on the construction market you’ll find, trading at less than seven times next year’s earnings.
Best Trump Stocks No. 3: PNC (NYSE: PNC)
The odds of a December interest rate hike have soared since Trump’s win, now to over 90%. Observers expect a huge Trump infrastructure bill will force the Federal Reserve accelerate monetary tightening. The biggest winners from higher rates will be the regional banks, and one of the best in the business right now is PNC.
PNC trades at just over book value and pays a 2% dividend yield. It managed to increase its dividend for the last five years. Another PNC catalyst will be Trump’s promise to repeal the Dodd-Frank financial regulations. Higher rates and less regulation is great news for PNC.
As the country moves toward a Jan. 20 inauguration, the market is still trying to make sense of a Trump presidency and its policies. However, certain stocks can also still outperform in the new environment, regardless of whether specific proposals come to fruition or not. The three companies above are just that.