Published on January 13 2018

These Companies Will Be the Biggest Winners From Trump’s Tax Cuts

Justin’s note: Regular readers know that I’m always searching for the best moneymaking ideas to capitalize on today. That’s why I’m featuring this recent piece from my good friend Nick Rokke, analyst for The Palm Beach Daily—who takes a close look at what Trump’s recent tax cuts will mean going forward.

More importantly, Nick pinpoints the top 10 companies that will be the biggest beneficiaries from this. You’ll want to keep them all on your radar…


By Nick Rokke, analyst, The Palm Beach Daily

It’s official. Tax cuts are coming.

On December 22, President Trump signed the most sweeping tax legislation in more than 30 years.

And that’s got the Palm Beach Research Group office abuzz.

Experts are debating whether tax cuts will be good for individuals. But at the Daily, we don’t debate politics. We’re about making money in the markets.

And there’s no debate that tax reform will be great for corporations.

Starting this year, the corporate tax rate will fall from 35% to 21%.

That means any company that had an effective tax rate of 35% in 2017 will be able to hang onto an additional 14% of their profits in 2018.

Anytime a company can hang onto more of its money, that’s good for stock prices.

Recommended Link

6 more states set to legalize marijuana

• Missouri
• Oklahoma
• Utah
• Michigan
• Vermont
• New Jersey

Are all moving forward with some form of marijuana legislation. And Massachusetts has already legalized recreational pot and is set to start selling it later this year.
And later this year, Canada is set to legalize recreational pot for the whole country.

The legal marijuana market is going to explode in 2018. And it’s not too late to get into these little-known pot stocks now. If you don’t, next year at this time, you’ll be sick to your stomach when you see how the marijuana stock market has hit.

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But there’s another benefit for corporations in Trump’s plan… They’ll be able to “repatriate” money held offshore for a one-time low rate of 15.5%.

This won’t surprise regular readers…

Palm Beach Letter editor Teeka Tiwari predicted back in October that we could see over $2.6 trillion of offshore cash come back to the states once the tax bill becomes law.

Here’s what Teeka told me then:

The last time the U.S. had a cash “repatriation holiday” like this was in 2004. That’s when George W. Bush signed the Homeland Investment Act.

The act gave a one-time deduction of 85% from taxable incomes received from overseas.

That made the effective tax rate 5.25%, down from the normal 35%.

Over 90% of foreign cash was brought back within our borders.

And if it goes through, shareholders will be the No. 1 beneficiary.

Of course, the one-time 15.5% tax is much higher than what companies paid during the 2004 “repatriation holiday.”

But it’s still nearly 30% lower than the new 21% rate. So, we expect plenty of companies to take advantage of this one-time opportunity.

And they’ll use the additional money to fund new projects that increase profitability. Or, more likely, they’ll return the money to shareholders through dividends or buybacks.

No matter what happens, investors win.

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How to Pick the Biggest Winners of Tax Reform

Not every company will benefit from this reform.

Companies not making a profit won’t be helped… They already pay zero taxes.

And any company that doesn’t operate overseas won’t get a one-time boost from the repatriation tax break.

The biggest beneficiaries will be profitable U.S. companies with large piles of overseas cash.

Here’s a list of 10 companies that pay a high effective tax rate… and hold a high percentage of cash overseas.

Company Ticker
3M MMM
Apple APPL
Bristol-Myers Squibb BMY
Caterpillar CAT
Cisco Systems CSCO
Foot Locker FL
Illinois Tool Works ITW
PepsiCo PEP
Symantec SYMC
Ralph Lauren RL

Now, this is very preliminary research. We haven’t done any more than identify the companies most likely to benefit from Trump’s tax plan. Do your due diligence before considering any of them.

But they’ll be at the top of our radar for the first quarter of 2018. And we suggest you keep your eye on them, too.

Tax reform will be a continuing story this year. And it will be a tailwind for these types of companies.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. According to our research, President Trump’s tax reform package will become law on or around January 15, 2018…

Teeka’s just prepared an urgent white paper on how to tackle this once-in-a-lifetime opportunity. It’s called “The ‘All-Star Five’ Trump Refund Stocks for 2018.”

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Reader Mailbag

Today, more feedback on our recent essay, “Why Sessions Can’t Stop This Marijuana Boom”:

Are you kidding me? Marijuana stocks were down with Sessions declaring a federal open war on its legalization. While he is a total moron, this report is almost equally moronic to ignore the short-term headwinds driving these stocks down. Longer-term, he won't matter and they are likely to be good performers.

—John

I think you guys are being wildly optimistic in your cannabis predictions, based on what Jeff Sessions just did. I understand, you are trying to sell subscriptions. The issue won't really be resolved until the Congress and the Justice Dept. resolve the “states’ rights” issue. I don't expect them to vote in favor of states and against the power of the federal government anytime soon. I wouldn't even want to be an investor, because from what I've heard the IRS might be going after investors. Perhaps you might want to address these aspects of the wildly profitable cannabis opportunity.

—Paul

As always, send in any questions or suggestions for the Dispatch right here.