For the most unpredictable president, perhaps in history, what do we get in the State of the Union speech? Perhaps the most predictable litany imaginable -- at least economically.
Yep, last night not only did Donald Trump not dazzle, not soar, not surprise with grand plans and incredible ideas. He simply gave stock market participants exactly what they wanted: an ode to $8.0 trillion in additional value, a pledge for more defense spending, and, in an added but arguably gratuitous mention, tacked on $500 billion to an undefined $1.5 trillion infrastructure plan to rebuild the usual bridges and tunnels and highways that have been shellacked by too much traffic and not enough rehab.
It's ironic, but this president does, indeed, know what the stock market wants from him: cheerleading, more defense dollars and less regulation, especially when it comes to big business, not small business -- although we get the paean to the latter pretty much every day.
Let's break down the State of the Union into stocks, so we know what the heck we are getting here: nothing ethereal, nothing earth-shattering, just good old-fashioned rhetoric per share.
First, the primo group in this market right now is defense. Makes a ton of sense, as Trump made sure everyone knew, repeatedly, his commitment to backing allies and making America strong militarily again.
Suggested buys: Lockheed Martin (LMT) off the fighter jet franchise, Harris (HRS) for the radio and communications business and Raytheon (RTN) for the Patriot missile business, the latter being supported by our allies in the same way that foreign auto companies feel they better build here or risk the president's wrath. The foreign one-off Raytheon orders, by the way, now add up to about 32% of the high-tech defense company's business.
Will anything really be done on infrastructure? The president did get to the root of why there is no such thing as shovel-ready, which is the ease with which anything can be blocked via environmental impact statements and leverage of the courts. If he can really do something about that, then you would be a size buyer of Caterpillar (CAT) and United Rentals (URI) off of government orders. As it is, though, the strength in both of those companies' stocks has more to do with the commodity rallies and construction both worldwide and domestic than anything the feds are trying to do.
In fact, I trust state budgets and private industry construction plans far more than federal government monies when it comes to infrastructure. If you think I am being too cynical, go look at the list of the largest ongoing projects that U.S. Concrete (USCR) , the heavyweight in the business, is involved in: bridges backed by local authorities and headquarters, mostly from Silicon Valley but also from relocations to Texas. You never see huge federal commitments on that list.
Still, with the idea that it could happen, look to Action Alerts PLUS charity portfolio holding Nucor (NUE) , both on the conference call and with my interview with John Ferriola, the CEO, who delivered the best quarter for this company in a decade for the largest steel company in the country.
Ferriola's not tilting his production toward bridge and highway steel like the Bethlehem of old-think the steel of the giant Verrazano Narrows Bridge -- but he is building a $250 million state-of-the-art mill for rebar, the base of construction steel. The stock's cheap at this cadence and that's before anything from the feds.
Finally, if you want to make money in a less obvious way, it's to continue to focus on private industry and healthcare, with the prospect that the Amazon (AMZN) -Berkshire (BRK.A) -JP Morgan (JPM) initiative will be more chimerical, perhaps because you can't build anything that's non-profit and have it rival, say, Cramer fave Centene (CNC) , rapidly becoming the default health care company in the country. It's not a State of the Union pick as much as a non-pick in the benign way Trump addressed healthcare as the focus has shifted to immigration.
There was a time when a president gave us surprises when it came to the stock market. Not this guy; he's more of a raising-numbers reiterate-buy president -- the best kind if your only litmus test is higher stock prices.
