ALERTS, CHARTS, & HOT STOCKS

[hughes16]

Positioning for Trump Presidency: Summary of David Einhorn's 4Q16 Letter: Positioning for Trump Presidency

- In light of Trump presidency, thoughts on current positioning:
- Long a variety of low-multiple, tax-paying, US value stocks: most benefit to companies that have profits on which to pay taxes (AMERCO, CC, Dillard’s, and DSW)
- Long AAPL: to benefit from repatriation of foreign cash and tax reform
- Long GM: more jobs, higher income, and higher wages to drive demand for consumer durables; also falls under low-multiple, tax-paying US value stock category
- Short “bubble baskets”: mostly don’t have profits (no tax benefits) and accelerating economy should allow investors to find growth without needing to pay nosebleed prices for a narrow group of profitless top-line growth stocks (Netflix)
- Short oil frackers: economies still don’t work when all investment and corporate costs are taken into account; “drill-baby-drill” attitude is likely to lead to additional mal-investment which will lead to lower prices and deeper losses; generally not cash tax payers
- Short CAT (and a few other similar industrial cyclicals that have moved much higher post-election): CAT sells machines that are used in infrastructure but this is only a small part; CAT’s biggest segments are mining and energy; just completed once-in-a-generation boom in iron ore mine development and horizontal drilling which means we can produce more oil with fewer rigs; even in infrastructure boom, CAT closed the year at 33x forward earnings
- Continue to own gold; there has been a knee-jerk decline in gold since the election, as investors presume that higher short-term rates are good for the dollar and bad for gold; great economic, geopolitical, and policy uncertainties, wider budget deficits, and possibility of inflation problem all support gold