Yesterday, I kicked off this special three-part Inauguration series by explaining why the incoming administration will be a game changer on Wall Street. Today, I’m giving you the information you need to act on this information. President-elect Trump has made it very clear that he wants to increase defense and infrastructure spending, as well as boost domestic energy production.
I have handpicked four stocks that are poised to break out under the new administration, so if you’re looking to invest in the Trump rally, this is an excellent starting point. Let’s take a look…
Top Defense Stock
Northrop Grumman (NOC) is a major defense contractor, serving the U.S. and 25 other nations. Northrop Grumman brings in nearly $25 billion in annual sales through building aircraft carriers, tankers, strategic bombers as well as radar systems.
NOC posted solid operating results for the most recent quarter. More importantly, the company is in excellent shape for FY 2017. Looking ahead, analysts expects full-year EPS of $12.14 on sales of $25.03 billion. This translates to 4.1% annual sales growth and 3.9% earnings growth, which is solid for the defense industry.
However, those estimates will likely climb higher after President Trump releases his proposed defense budget in January or February. Analysts consider Northrop Grumman to be one of the top beneficiaries of the expecting increase in defense spending.
I must also mention that Northrop Grumman repurchased $3.2 billion of its shares last year, as it continues its generous $4 billion share repurchase program. This, combined with a 1.7% dividend yield, makes NOC an excellent long-term investment. NOC is a B-rated Buy in Portfolio Grader.
Top Infrastructure Stock
MasTec Inc. (MTZ) has provided engineering, construction and maintenance support for major infrastructure projects throughout the U.S. for the past 80 years. The company operates in several industries, including utilities (wind farms, solar farms and natural gas), government (water and sewer) and communications (wired and wireless telephony).
The company is in line to benefit from an increase in infrastructure spending under the Trump administration, as it provides engineering, construction and maintenance support for major infrastructure projects throughout the U.S. As a result, analysts have been revising their earnings estimates higher since the Presidential election in November.
Currently, MasTec is expected to report triple-digit earnings growth for the foreseeable future. For the fourth quarter, earnings are forecast to surge 157% year-over-year to $0.54 per share, up from $0.21 per share in the same quarter a year ago. Analysts are also looking for sales to grow 27.6% year-over-year to $1.31 billion. And the best part is that MTZ is expected to keep up the pace through 2017. MTZ is an A-rated Strong Buy in Portfolio Grader.
Top Metals and Mining Stock
In an industry that’s usually plagued with poor fundamentals, Teck Resources Ltd. (TCK) has phenomenal forecasted sales and earnings. Based in Vancouver, this is Canada’s largest diversified mining company. It is the third-largest producer of zinc concentrate, and it’s the second-largest seaborne exporter of steel-making coal. It is also a major producer of copper across North and South America. Teck Resources also produces gold, silver, cadmium and molybdenum, which are used in structural and stainless steel production.
As the operator of one of the world’s largest zinc mines, Teck Resources will continue to profit from increased infrastructure spending. The fact is that zinc is used in stainless steel, so prices will continue to rise in anticipation of an infrastructure build-out under the Trump administration. Teck Resources has already been enjoying record-breaking sales and earnings growth due to surging zinc prices, as well as higher steel-making coal prices.
And the analyst community expects Teck Resources to keep up the momentum. For FY 2017, earnings per share are expected to surge 205% and sales are expected to jump 32%. Analysts have also been aggressively revising their earnings estimates higher through the end of next fiscal year, so Teck Resources will likely do even better. As an added bonus, TCK trades at less than 11 times forecasted earnings, and it has a modest dividend yield of 0.3%. TECK is an A-rated Strong Buy in Portfolio Grader.
Top Dividend Stock
CONE Midstream Partners LP (CNNX) is a natural gas master limited partnership (MLP), operating properties in the Marcellus Shale area of Pennsylvania and West Virginia. I like CONE Midstream Partners for two main reasons. First, it is poised to benefit from higher natural gas prices. Second, it will directly benefit from resurging production in the Marcellus shale region. The incoming administration is expected to boost shale and natural gas firms by lifting regulations and stimulate domestic energy production.
This builds upon CONE Midstream Partners’ already strong fundamental foundation. During the third quarter, the company’s net income jumped 20% year-over-year to $23.6 million. For FY 2017, the analyst community is looking for 10.1% earnings per share growth and 8.4% sales growth. Then again, CONE Midstream Partners has an excellent track record of earnings surprises, so it’ll likely do even better.
I must also mention that CONE Midstream Partners has paid a dividend for seven-straight quarters, with a third-quarter dividend of $0.26 per share paid in November. That represented a 3.5% increase over the third-quarter 2015 dividend. CNNX currently has a 4.52% dividend yield. So, it’s easy to see why CNNX is one of my rare double-A stocks. That is, it earns top marks in both Portfolio Grader and Dividend Grader.
Check Your Inboxes Tomorrow
The key takeaway here is that there are plenty of exciting buying opportunities to be had right now. However, I don’t necessarily recommend that you start loading up on all defense, construction, mining and energy stocks just yet. There are still a few trouble spots in the stock market that need to be navigated. Tomorrow, I’ll post the final installment of this special inaugural series—a breakdown of which sectors, and which stocks, should be avoided right now. If you want to receive an email with this special report, simply sign up to my mailing list here.