Your Investing "Need-to-Know" — For Trump 2.0
Five storylines — and five stocks — the Trump White House will supercharge ...
Yesterday was Inauguration Day in our nation’s capital.
Technically speaking, Inauguration Day is the “first day on the job” for an incoming U.S. president.
But that first “workday” begins at noon.
So the day after Inauguration Day is the first “official” full day of work.
That’s today.
Welcome to Trump Administration 2.0 — Day No. 2.
U.S. President Donald Trump returns to the White House benefitting from a strong tailwind … or headed for a storm — depending on your point of view.
The bulls are charged up: They see a strong economy that’ll keep people working and buying — translating into strong corporate earnings and a continued surge in U.S. stock prices.
The bears are fretting: The see an economy that can’t stay strong forever, consumers who are straining under loads of debt (a record $17.94 trillion) and a stock market that’s priced for perfection — a possible one-two punch that’ll trigger dual downturns in the economy and the stock market in the not-too-distant future.
Both points of view have merit.
And that could lead to one heck of a volatile run … as emotion causes investors to believe the upbeat narrative one day … and the downbeat one the next.
That’s why, here at Stock Picker’s Corner (SPC), we play the long game. We rise above emotion … and look for powerful storylines that we expect will play out over three, five, seven or 10 years — or more.
But some of those storylines line up — some of them perfectly — with the start of Trump 2.0.
I underscored this commitment to the “long view” in my “Trump Trade” story last year that was shared with you as the Trump presidential campaign spooled up.
And I underscore it again here.
So let’s look at a few of those powerful storylines — and the stocks that go with them — here on Day No. 2 of the second Trump Administration.
You’ll even see where some of these storylines intersect — something I refer to as “convergence opportunities” — meaning the long-term potential for Wealth Builders is even stronger.
Storyline No. 1: Death of the Global Economy
Between my 22 years as a business reporter and the 20 years I’ve spent since as a financial writer and stock picker, I’ve being doing this for a long time. So I remember when the big trend was “globalization” — and the real-world enactment of Adam Smith’s “comparative advantage.” I remember “Europe 1992” — which led to the creation of the European Union. And I remember — and traveled there firsthand to see it — when Mainland China became the low-cost “factory to the world.”
That led to decades of global prosperity, controlled inflation and focused investments.
That’s now being unwound.
Welcome to the “Deglobal Economy.”
It started before this week … and has been underway for several years, now.
But tariffs, stiffer borders and strong-arm tactics are all code-words for deglobalization — leading to “re-shored” manufacturing and automation, trading blocs and (splashes of) potential isolationism.
That’s bullish for continued domestic capital investment (especially in areas like chip manufacturing), heightened tech R&D (especially in areas like artificial intelligence (AI)) and defense spending.
Chip production — and the continued shift away from China as a trusted supplier — is a major storyline.
One beneficiary: Taiwan Semiconductor Manufacturing Co. (TSM), the chip factory to the world.
The global economy is paved with silicon — semiconductors go in everything these days — and Taiwan Semi produces the chips designed by companies like Nvidia Inc. (NVDA), Advanced Micro Devices (AMD) and even Apple Inc. (AAPL).
At the end of last year, Taiwan Semi accounted for 64% of the world’s “pure-play” foundry business.
AI accelerators, smartphones and more are driving demand for Taiwan Semi’s production capacity. It’s also looking to mitigate some of the risk it faces — it spends every day peering the 81 miles across the Taiwan Strait at covetous enemy Mainland China. So it’s building new chip plants — called “fabs” in industry lexicon — in Japan, Germany and here in the United States.
Indeed, despite some tariffs-versus-subsidies rhetoric by the incoming administration, Taiwan Semi says it remains committed to the $64 billion worth of projects it’s got planned for the United States.
Taiwan Semi is projected to grow earnings at an average annual growth rate of 20% over the next five years, meaning profits will double in less than four.
This entire storyline was already off-and-running long before Inauguration Day — so I’m confident it’s about to gain muscle.
Storyline No. 2: Let’s Make a Deal
Remember when I said I’ve been doing this for a long time? Well, I was three years into my reporting career when financier Donald J. Trump’s book “The Art of the Deal” made its debut and quickly hit the bestseller list. (I also remember an interview he did with a journalist where he famously proclaimed that “Cash is King.”)
So it’s no surprise that deregulation — and a spike in dealmaking — will only gain strength.
Notice that I said “gain” strength.
For, once again, the dealmaking boom is a pre-existing storyline that’s already off to the races.
Since early last year, we’ve been talking about the boom in buyouts, mergers and special-situations like spinoffs, buybacks and boosted dividends.
(For our SPC Premium Family Members, we’ve even created our “Super 10” portfolio of special-situation stocks — and one has already notched a 60% windfall.)
We’ve also talked about the “Private-Equity Tidal Wave” — where the leaders of the $8.2 trillion private-equity (PE) business are “big-footing” just about everything — from your kid’s Little League team to your favorite pro sports team … as well as industries ranging from insurance to tech to consumer brands.
In Trump 2.0, we expect deregulation — which will make it easier than ever for deals to get done. Big companies will gobble up smaller ones. Big Pharma firms careening toward the “patent cliff” will look for “bolt-on” acquisitions to shortcut drug development and refill their product “pipelines.”
In this new “Art of the Deal Age,” private-equity funds and investment banks will be the Big Facilitators – the money folks and the facilitators that’ll help make these deals real.
Here I’ll give you an easy way to play this …
By any name, it’s a winner.
We’re talking about a 156-year-old investment bank that navigated the Great Depression, the 1987 stock market crash, the Dot-Com implosion, the global financial crisis and Great Recession and the COVID-19 Pandemic.
It just doesn’t lose.
I’m talking about Goldman Sachs Group Inc. (GS).
Two of Goldman’s core businesses are wealth management and dealmaking. And many of the “triggers” I’m watching will feed into both.
Goldman itself says investors should favor stocks over bonds — at least until 2030 — which tells us it believes worldwide wealth will surge. I agree, and the forecasts back us up: Indeed, global assets under management (AUM) will grow from $126.99 trillion in 2023 to $205.6 trillion in 2032, projects Credence Research.
Expect dealmaking to accelerate, too, as industries consolidate, new companies go public, and startups and private firms seek financing. Dealmaking is a key element of Goldman’s investment-banking business and would generate lucrative fees.
The forward dividend of $12 a share represents a 2.1% yield at current prices. And that yield goes up as the share price goes down.
Even now, Goldman Sachs is projected to grow profits at an average annual pace of 25.7% for the next five years — meaning earnings will double in less than three.
Storyline No. 3: Hyping the AI Era
If you learn only one thing from today’s issue, learn this: The meaning of the word “hyperscaler.”
In plain English, a hyperscaler is a firm that provides massive amounts of cloud storage and raw computing power. They are part of the Tech Enablers that drive the AI Era. Outfits like Amazon Web Services (AWS) and Microsoft Azure run sprawling data centers, housing thousands upon thousands of computers. These are the "unseen magic" behind the thousands of pictures we've snapped with our iPhones, the movies we stream on Netflix or Amazon Prime, all the time we spend on social media and all the great content we create and read here on Substack (which, I believe, is an AWS customer).
The term "hyperscaler" comes from the ability of Azure, AWS, and others to quickly "scale up" or "scale down" their computing resources to meet the data and traffic demands of the moment.
In North America alone, the hyperscaler market is projected to grow from $38.39 billion in 2024 to $458.33 billion by 2034, a compound-annual growth rate (CAGR) of 28.12%, says Precedence Research.
One hyperscaler that I’m intrigued by right now — and one that not in our SPC Premium Model Portfolio or Farm Team (at least, not yet) — is Alphabet Inc. (GOOGL).
Fact is, Alphabet is currently a “Three-Trigger Stock,” thanks to:
The AI enhancements it’s made to its search, advertising and cloud-storage businesses (in the latter, Google Cloud is No. 3 globally, with 11% of the market).
It’s “special-situation” status, thanks to a U.S. Justice Department effort to break up the company over its alleged search monopoly. These breakup efforts rarely succeed — but even if they do, I like breakups and spinoffs.
And as a kind of “call option” on quantum computing (a story I like a lot) — given its recent breakthrough with its Willow chip. (A recent Willow computation that took just five minutes would take the world’s very best supercomputer 10 septillion years to solve.)
Alphabet shares really interested me before the Willow announcement caused the stock to jump. But with a five-year earnings CAGR of 19%, you’re talking about profits that would double in less than four years.
That’s an “earnings equation” I dig.
Especially with a hyperscaler.
Storyline No. 4: Big Pharma’s “Next Blockbuster” Era
I love this one — and you know why?
We’re looking at the convergence of the three previous storylines:
Story No. 1: Deglobalization: Here we’re looking at reducing our reliance on overseas pharmaceuticals and bolstering the U.S. supply chain to improve quality control and make America more responsive to health crises – especially urgent in this era of possible geopolitical disruptions.
Story No. 2: Dealmaking: I’ve covered biotech as a reporter and as a stockpicker, so I know that it takes a decade and $2.6 billion to get a new drug to market. That “Biotech Math” makes the looming “Patent Cliff” a sector “trigger” to watch. Between now and 2030, about $236 billion in pharmaceutical sales are at risk due to patent expirations. That’s double the Patent Cliff I covered back in 2012-16, when I picked out 818% buyout winner Pharmacyclics Inc. Major drugs like AbbVie's Humira, Merck's Keytruda, Bristol Myers Squibb's Opdivo and Johnson & Johnson's Stelara face the Patent Cliff. In the old days, dealmaking was the only way to “shortcut” that Patent Cliff. We’ll see more deals made during Trump 2.0. But now …
Story No. 3: The AI Era: AI is a lever that can compress the time-to-market cycle for drug development by helping companies identify better “targets” — the “bad dudes” in the body that need to be fixed — creating the compounds to pull that off and designing the trials to test and perfect them.
Just as investment banks are the “facilitator” in dealmaking, there’s one company that’s a “facilitator” in new drug development — for itself and for other companies.
That company is the Boston-based Vertex Pharmaceuticals Inc. (VRTX), a biotech innovator that leverages AI to rev up drug development for serious illnesses — like cystic fibrosis.
It’s also collaborating with other companies. It recently announced a three-year strategic research collaboration with early-stage venture firm Orna Therapeutics to develop next-generation gene-editing therapies for such blood diseases as sickle cell and transfusion-dependent beta thalassemia. Vertex is also collaborating with Verve Therapeutics (VERV), a company that specializes in gene-editing therapies for cardiovascular maladies.
Storyline No. 5: When Uncertainty and Volatility Meet
We’re probably in for a volatile ride.
And these days volatility = trading which = an explosion in options volume.
“Timing the market” — going “all in” and “all out” at different times — is a loser proposition for retail investors. Even with the best intentions, the moves are almost never based on a system — and are almost always driven by emotion.
But that’s exactly what’s happening. A kind of “DraftKings Betting Mentality” has infected the retail-investing market.
And the explosion in options trading has made it even worse.
The Intercontinental Exchange (ICE) reported a 24% year-over-year surge in average daily options volume last year thanks to the easy access to trading platforms and zero-commission trading helped fuel this. Retail investors accounted or 45% of options trading volume — and researchers say regular investors are increasingly trading speculative options, as opposed to speculative hedging.
Not that those folks are doing all that well: An MIT Sloan found that retail investors lost more than $2 billion in options premiums from 2019 to 2021 — the result of inexperience, lousy timing and high-risk (or no real) strategies.
We’re going to profit – by taking the “other side of the trade” … well, sort of. Check out CBOE Global Markets Inc. (CBOE), an operator of financial exchanges, which includes the Chicago Board Options Exchange. It provides data analytics, trading tools and the technology for trading options, futures and other financial products. And it’s one of the largest clearinghouses for options trading. As such, you’ll win as trading grows — which it no doubt will as uncertainty climbs.
As a recap, the five companies mentioned today were:
Taiwan Semiconductor Manufacturing Co. (TSM)
Goldman Sachs Group Inc. (GS)
Alphabet Inc. (GOOGL)
Vertex Pharmaceuticals Inc. (VRTX
CBOE Global Markets Inc. (CBOE)
With any of those, follow our specialized approach — something I refer to as the “Accumulate” strategy.
Find the best companies fueled by these powerful storylines (and others). Establish a “foundational” (starter) position in each; and look to add to your stake on pullbacks.
There are other stocks we like that are part of our SPC Premium slate of offerings, and that includes our Farm Team, Model Portfolio and Special-Situation Portfolio. It also includes:
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See you next time;
