After this weekend's blitz of tweets, do we have to start limiting the number of winning sectors we might be getting from a Trump administration?
Earlier I suggested that the big manufacturing companies may have to start rationalizing costs overseas, not here. Trump's given them the freedom to move from high-paying union states to lower-paying non-union states, but that's not exactly a freedom they didn't have before.
We now have to analyze the inability to cut costs from offshoring vs. the pros of tax reform, repatriation and deregulation. That's bad for the numbers of most manufacturers, and we care about the numbers.
We have to be concerned that the call the president-elect had with the Taiwanese president portends a follow-through with the "stick it to China" policy that he advocated throughout his campaign and has for many years. That's bad for those who need that Chinese market for sales, everyone from Caterpillar (CAT) to Apple (AAPL) to Procter & Gamble (PG) . (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
We will have to be cognizant that Trump's no friend of health care, just an enemy of the Affordable Care Act, and that doesn't necessarily bode well for big pharma, nor do the big price increases that have been put through by many of the idea-starved pharmaceutical companies.
Sure, we have deregulation, lower taxes and repatriation. The big three loom large. But we seem to be chipping away at the winners slowly but surely: the companies that rely on globalization, the companies that rely on rationalization and the companies that could be vulnerable to a tweet about drug increases.
So who is unscathed? Who remains, a month after the election, in much better shape despite the tweets and the offshoring tariff threats?
Three industries? Banks, steels and fossil fuels.
From the very beginning, there has been a concern that Trump could turn out to be a populist when it comes to the banks. But these most recent picks, Wilbur Ross at Commerce, who champions old-line industries, of which the only viable and investable one is steel, and former Goldman Sachs (GS) partner Steve Mnuchin at Treasury spell good things for the banks.
With Ross in the Cabinet, steels are obvious as he knows the beleaguered U.S. industry and its trade enemies better than anyone else alive, especially after his successful creation and selling of International Steel Group, a risky aggregation that paid off big. I don't think you will see any tariffs lifted any time soon against South Korea or China, especially after the weekend's call with the president of Taiwan and the tweets telling off the Chinese. If anything, Trump's going to attempt to open export markets for the group. I like Nucor (NUE) as the winner of any trade tiff.
Meanwhile behind the scenes, members of Trump's team have made it clear that the days when any federal agencies are going to stand in the way of the fossil-fuel industry, especially those that want to put people to work building pipelines, is over. I got the sense when speaking to Gary Heminger, CEO of Marathon Petroleum (MPC) , that the federal government under Obama has worked hard to stymie pipeline development.
Classic example? The Army Corps of Engineers announced yesterday it is blocking the Dakota Access pipeline, partially owned by Marathon, a victory for the several thousand protesters who say a water source and some ancestral sites are threatened by it.
Lots of people have told me that when I say the fossil-fuel industry will do better under Trump, it's precisely decisions like this that I am speaking about because Trump had already endorsed the $3.8 billion Dakota line as well as Keystone, in principle, providing the U.S. can get a better deal. Very bullish for Marathon and a host of oil companies, refiners and pipeline master limited partnerships.
How about coal? Very hard. First, there aren't many investable plays that I am willing to recommend for coal. The ones I can bless, the rails, will most likely not be big winners given how cheap natural gas is vs. coal. But utilities that have felt pressure to close coal plants under a tough EPA may be free to extend their life, creating an opportunity for coal not to be phased out as quickly as it otherwise would have been. It's a removal of a negative.
Time and again, though, I come back to the banks being the biggest winners under Trump. Again, you have to think about the regulators. They can play hardball or they can go easy. If they go easy, earnings go higher.
The winners are palpable, the losers taking shape. Sure, this new regime may be positive for business, but it will be positive for some businesses a lot more than others and you have to refine your investments going forward as a general move higher may no longer be as robust and broad as we thought.
