Oil. Trump promised two sweeping changes to the global supply picture.
Thoughts and opinions ?
Achilles, Lots of good ideas. My thought is that most of the market's initial moves are correct but there are likely to be discouragement points along the way, creating dips and buying points. The basic play is the obvious one - Buy the domestic "real stuff" economy.
-I agree on refineries. I think CVI (Icahn's refiner) has run up excessively vs other refiners due to the connection, At this point I would consider some of the others. I think the action in CVI, however, has been very educational. It reminds me of the old days being able to make money off of CNBC mentions for large gains. Very frothy which suggests exited retail participation - total change in the environment that I think could continue and perhaps become more extreme between lull periods.
-The new commerce secretary is a big steel guy, Trump has pounded the steel economy as a major theme, and tariffs were put in place early last year. Once again prices have jumped a great deal, but off of a low level. A long term chart shows the way these things can run during a real economic cycle that favors them.
-Energy exports - I am still looking at this, but one obvious way to keep prices up and support the full energy economy (including coal vs. natural gas) is to massively expedite LNG and other energy exports. From a Trump perspective, it also has the benefit of helping to balance trade. Some interesting companies in this area.
-Banking - I can't say I know what will happen with the yield curve, but so long as it is positive sloping with a reasonable spread I believe the coming deregulation will be a massive profit booster - the industry has been hamstrung by regulation.
-The increased lending will also create a boom in "working man's" consumer spending as well as productive investment in "real goods".
-Tax reform - Much of it has been discounted, but a serious reduction in corporate tax will massively help the more profitable domestic companies - mostly small/mid/micro cap as has been mentioned. The popular mind says that all companies have loopholes and don't pay the top rate - this is not true, I am a small cap portfolio manager/researcher and I can say many pay the top corporate rate and will get a large EPS boost if tax reform i substantial.
-Construction aggregates - It is in part on infrastructure play, but also just a play on the "real stuff" economy.
-Defense spending - Trump's bulling of the large contractors on cost might seem concerning, yet if he truly wants to expand the navy, and rebuild our military (I think he does) it will be good for the defense economy. The "bulling element" might provide dips to buy - and also might suggest looking at contractors who are a bit below the radar.
-My long shot is Twitter - On one hand it is a confused, poorly run economy with a highly overvalued stock. On the other hand events on Twitter (Trump, now Russian embassy, etc) have been driving the news cycle for months - I don't see why increasing numbers of "news worthy" people will not follow trumps lead and make Twitter a primary "direct communication" tool, increasing its value for a takeover/acquisition by a company that can properly monetize it.
