ANNE ASHWORTH Helps Investors Find US Stocks

As the world gears up for significant political changes in America, the spotlight is on the recently inaugurated Donald Trump as the 47th president. While the festivities surrounding the inauguration garner attention, the focus soon shifts to the American economy and the implications of Trump's anticipated policies, including deregulation and tariffs.

Despite the impressive stock market performance seen in 2024, a new age of American exceptionalism appears to be emerging. Therefore, overlooking investment opportunities in the US market could prove to be a costly mistake for investors.

Goldman Sachs, one of Wall Street’s leading firms, has recognized that US stocks are relatively expensive but insists this should not deter investors from seizing opportunities in the market.

According to Gerrit Smit, the manager of the Stonehage Fleming Global Best Ideas Equity fund, the United States continues to be a global leader in entrepreneurship, innovation, education, and capital market dynamics, supported by strong demographic factors.

The outlook for the US economy is bright, with analysts from Bank of America projecting that economic growth and corporate profits will likely surpass those in other developed nations.

The S&P 500 index, which tracks the performance of leading American companies, has already seen a remarkable rise of 23% over the past year, reaching 5,816. Analysts predict that this index will continue to climb, potentially reaching 6,666 by the end of the year.

While many investors might already own shares in the renowned "Magnificent Seven" technology companies—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—numerous other tech firms and those in diverse sectors, including banking and healthcare, are also worthy of consideration.

Examples of companies that may thrive include major Wall Street banks, popular fast-food chains, and those providing entertainment to Americans. A notable mention is TKO Holdings, the parent company of WWE—Worldwide Wrestling Entertainment. Trump’s admiration for the spectacle of wrestling adds to the potential allure of this company.

Technology Sector

The emphasis on the tech sector, particularly the Magnificent Seven, remains strong. Smit highlights Amazon as a significant investment within his fund. Furthermore, Giles Parkinson, head of equities at Close Brothers Asset Management, acknowledges Microsoft’s critical role despite concerns about its heavy investments in AI and cloud computing.

Even cautious investors are encouraged to consider Microsoft, as it is poised to benefit from the doubling of technology spending projected over the next decade.

Investors can also look beyond the tech giants to companies capitalizing on digital innovations. For instance, Smit has a favorable view of Eaton, which specializes in electronic components and power systems.

Kirsty Desson, co-manager of the Abrdn Global Smaller Companies fund, promotes Vertex, which provides tax compliance software. This service is expected to see rising demand as companies adjust to the upcoming tax reforms and proposed tariffs.

Bank of America has recommended stocks such as Samsara, a digital fleet management company, and TaskUs, specializing in digital outsourcing.

Banking Sector

American banks have reported exceptional results recently, and there is potential for further growth under the Trump administration as capital requirements may be eased. This shift would enable them to increase lending or engage in share buybacks, which could elevate stock prices.

Key players like Bank of America, JP Morgan, and Citigroup are well-placed to benefit from deregulation. Analysts have recently increased Citigroup's target share price to $96, even though its current share price is around $74. Additionally, Desson identifies Wintrust Financial Corp as a high-quality regional bank likely to see increased demand.

East West Bancorp is featured on Bank of America’s list of recommended stocks, having already experienced a 40% increase in share price over the past year. Also included is Block, a payments company formerly known as Square, founded by Twitter’s co-founder, Jack Dorsey.

Energy and Construction Sectors

Trump’s administration is expected to favor policies promoting energy production, which bodes well for major oil companies such as ConocoPhillips and Exxon. Lesser-known companies, including Nucor, which supplies steel for energy installations, and Peabody Energy, which produces coal, may also find opportunities for growth.

Bettina Edmondston, who manages the Saracen Global Income and Growth fund, highlights the urgent need to upgrade the U.S. power grid, which is struggling with rising demands from AI and climate change. This scenario presents opportunities for companies like Caterpillar, a power generator giant.

Companies like Avient, producing specialty composites, and CRH, a leading building materials supplier, are anticipated to be key players in forthcoming infrastructure projects initiated by the Trump administration. CRH, having relocated its listing from London to Wall Street this year, stands out as an attractive opportunity for adventurous investors.

Consumer Stocks

Costco, a leading discount warehouse chain, saw its share price surge by 39% in 2024 and is still rated as a 'buy' despite its high valuation of 50 times earnings. This growth is bolstered by membership fees that promote customer loyalty.

Walmart has also risen significantly, achieving a market capitalization of $709 billion after a 72% increase in its share price this year. The company remains a solid investment due to its competitive edge against Amazon and its appeal to a youthful demographic.

Prominent trends have emerged, such as Walmart’s introduction of the 'Wirkin,' a budget-friendly imitation of luxury bags, which has gained popularity among social media influencers.

Desson favors elf Beauty, a mass-market cosmetics brand known for its vegan products and innovative approach that resonates well with younger consumers. Despite achieving consistent growth, its share price has not fully reflected this success due to concerns about potential import tariffs, which are likely to be phased in gradually.

Funds and Investment Options

For those considering investing in US stocks, Winterflood Securities recommends trusts like Scottish Mortgage, which holds significant stakes in companies like SpaceX, Amazon, Meta, and Nvidia. Another of their suggestions is Pershing Square Holdings, which has a diverse portfolio including Alphabet and the fast-food chain Chipotle.

Both trusts represent a solid investment in the US market, which comprises a large portion of many popular funds. For instance, Alliance Witan includes major US firms like Amazon and Microsoft among its highest holdings.

For those preferring the simplicity of index fund investing, the Vanguard US Equity index is a suggested option. Regardless of the chosen investment method, it is essential to note that US markets may currently be expensive.

To mitigate the risk of significant downturns, investors are encouraged to make regular contributions to a fund rather than investing a lump sum at once. A steady investment approach, often referred to as dollar-cost averaging, is advisable for those looking to invest in US equities.

investing, stocks, USA