It can be tough to find winners in any State of the Union speech. This is especially true when the President’s approval ratings are in the 30s and congressional opposition to his agenda has become intense.
As such, it might be better to look for stocks to buy in spaces that have already benefitted from the Trump years and assume little change in policy going forward. The 2017 tax cut is the signature event of this Administration, but it has not lifted all boats equally.
The impact of any Administration lies in its actions rather than its rhetoric. While the Obama Administration talked a lot about the need to rein in healthcare costs, healthcare stocks did very well during that time. Trump keeps talking about coal, but don’t dare invest in it.
Some of the biggest market winners over the last two years have been among companies the President has attacked rhetorically, while companies he has boosted, like big banks and oil companies, have not done as well as the averages.
This may change in the next two years. I think a pro-Trump portfolio without Exxon Mobil (NYSE:XOM) is missing something, although the shares are down 8.4% over the last two years. Shares in Goldman Sachs (NYSE:GS), former employer of Treasury Secretary Steve Mnuchin, are likewise down 18.4% over the last two years, despite the President’s embrace of Wall Street.
With all of that in mind, here are the spaces where you might find solid stocks to buy with Trump still in charge.
As I mentioned earlier, companies that Trump has attacked rhetorically have been among the best investments during his Administration — and perhaps no other space has come under fire as much as the Cloud Czars during his reign.
The First Trust Cloud Computing ETF (NYSEARCA:SKYY) is up 47% over the last two years, while the average Nasdaq stock is up only 28%.
Shares in Amazon (NASDAQ:AMZN), where CEO Jeff Bezos has been a particular target of Trump’s animus, have doubled in value over the last two years. As stocks opened for trade Feb. 6, Amazon was the second-most-valuable company in the world, trailing only Apple (NASDAQ:AAPL), and that is by less than $10 billion.
Other cloud czars such as Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT), have also done exceedingly well. The cloud’s chip suppliers, such as Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), have done spectacularly well.
Companies whose applications run in the clouds, like Netflix (NASDAQ:NFLX), Adobe Systems (NASDAQ:ADBE) and Salesforce.com (NYSE:CRM), have all risen to glory over the last two years, and trillions of dollars in new market cap have been created, even after accounting for the bear market in late 2018 that took some down as much as 30%.
When most analysts looked for stocks to buy with the coming Trump Administration on their radar, their first bet was on the defense stocks, represented by the SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR). Over the last two years, XAR has gained 37% in value, which is one-third better than the average Nasdaq stock.
Other big defense stocks haven’t done quite that well, but Northrop Grumman (NYSE:NOC) has increased its dividend from 90 cents per share to $1.20, and General Dynamics (NYSE:GD) has increased its quarterly payout from 84 cents per share to 93 cents.
Your best bets in this sector may lie in smaller companies with specialized technologies. Harris (NYSE:HRS), known for avionics and defense satellites, is up by 49% over the last two years. Leidos (NYSE:LDOS), which makes command and control systems, has been on a tear since 2019 began, rising 16%.
Health insurers have been free to fly, in terms of the rates they charge and the care they may not provide, under President Trump. You will find some of these companies in the Health Care Select Sector SPDR ETF (NYSEARCA:XLV).
One of XLV’s largest holdings is in UnitedHealth Group (NYSE:UNH), which has been the star of the healthcare sector show, up 65% over the last two years. Its strategy of avoiding the Obamacare exchanges while focusing on technology and drug disbursement through its Optum unit has paid off handsomely, making it one of the best healthcare stocks to buy over the past two years. The company grew revenue over 22% between 2016 and 2018, but, more importantly, profits grew 70%. The stock is still trading roughly in-line with the rest of the market, at a trailing price-to-earnings multiple of just 22.
Managed care companies have done even better. The star here has been Centene (NYSE:CNC), which makes money managing Medicare and Medicaid contracts. CNC has doubled in value over the last two years.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in AAPL, MSFT and AMZN.