Biggest Trump Tax Cut Winners

Top ten high tax rate companies reporting little in foreign taxes

The following companies stand to benefit the most under a Donald Trump corporate tax cut. That’s because they pay very high corporate taxes, and they report few, if any, foreign tax payments. (Companies with a market cap below $500 million excluded.)

For more on this, please see my recent MarketWatch columns on Trump tax cuts. You can find them here and here.

 
Top ten high tax, low debt companies

The following are the top ten companies paying the highest corporate tax rates while having relatively low debt levels. One theory among investors like Larry Puglia at T. Rowe Price ($55 billion under management) holds that Washington may reduce deductions for interest payments, in addition to cutting the corporate tax rate.

If so, the companies that would benefit the most are those that pay a high corporate tax rate, but have relatively low debt levels. These are the top contenders. (Companies with a market cap below $500 million excluded.)

 
There are over 200 companies that pay such high taxes they are bound to benefit under Trump tax cuts. For more on high tax companies that may benefit from Trump tax cuts and regular updates on other investing themes, subscribe to my stock newsletter here.

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Here are some examples of several recent successful trades and investing ideas:

* 53.3% gains in five months vs. 9.3% for the S&P 500

The story: Back in June, 2016, the market was in a panic about Brexit. My own analysis showed that the economic damage to the U.S. and Europe from Brexit would not be so bad. So I suggested ten equities to buy as a contrarian play, when most people were selling. Within two days, those ten names were up 11% vs. 5.2% for the S&P 500. By the middle of November, my ten picks were up 55.3% compared to 9.3% for the S&P 500.

29.6% gains vs. 1.53% for the S&P 500 in less than four months

On July 31, 2016 my system put out a strong buy signal on the banking sector. I suggested five banks to subscribers. By November 21, they were up 29.6% compared to 1.53% for the S&P 500. Plus they all kicked out dividends along the way. The five yielded around 2% at the time, on average.

* 22 percentage points of outperformance in a month

On October 13 I asked my subscribers to buy biotech as a contrarian play because the group was so disliked. I suggested the five biotech stocks that came up the strongest in my system. By November 17 they delivered 22 percentage points of outperformance. They were up 25.3% vs. 2.6% for the market (SPY) and 7.4% for biotech overall (the IBB).

* 27.8% gains in three months vs. 0.3% for the S&P 500 (plus an unwitting nod from Warren Buffett)

In early August I suggested airline stocks which suddenly ranked high in my system. By mid-November they were up 27.8% compared to 0.3% for the S&P 500. Later, we learned that Warren Buffett was buying airlines around the same time my system favored them.

* 18 percentage point market outperformance in three weeks

On October 24 I wrote that “Biotech sentiment has turned particularly sour, suggesting it is a good time to ramp up buying there.” I singled out three prior suggestions and introduced two new ones. Within three weeks those five names were up 20% compared to 1.6% for the market (SPY) and 7.2% for the sector (IBB). The five stocks were up 7.3% to 29.7%.

* 4%-5% market gains in two weeks

On November 1 I noted that stocks overall were starting to look more buyable because sentiment was turning negative. I offered one simple publicly available indicator as a guide to the best time to buy. That indicator triggered on November 2 and 3. Subscribers who bought the broad markets on those dates were up 4%-5% in two weeks.

* Brush Biotech 15 model portfolio (buy and hold) 3x-7x the IBB

The eight larger cap (and theoretically safer) names in the Brush Biotech 15 model portfolio (introduced January 26, 2016) were up 44% as of November 17, 2016, or 7.3 times as much as the 6% return for the IBB. The entire Brush Biotech 15, including the seven riskier names that started with market caps below $500 million, were up 17%, or nearly three times the 6% return for the IBB.

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