It has been a fun week of political theater for the Republican National Convention in Cleveland, and for those who think that Donald Trump can make America great again, there are certain stocks and sectors you may want to consider.
The honeymoon for the RNC will last a good solid week after it’s over, and we still have months before the election.
One can never say for certain what stocks are likely to benefit under a given administration, even with a Republican candidate, but I found three that I think will do well no matter who wins the election.
That’s because they are subject to forces that transcend politics, and which can even benefit because of politics.
These stocks can also fit into a long-term diversified portfolio, the importance of which I discuss in my new column called The Liberty Portfolios. They will do well no matter who is in charge, and they are important parts of the American economy.
Stocks to Buy for the RNC and Beyond: Smith & Wesson Holding Corp (SWHC)
Smith & Wesson Holding Corp (SWHC) is a curious beast. Whenever there is some call for gun control, gun stocks soar. That’s because there is a sudden fear that Americans will be prohibited from owning guns.
One of the possible outcomes of the election is that the Supreme Court will end up gutting the Second Amendment and make a lot of people very angry. There’s no way people will be required to give up their guns, but if more severe restrictions are set in place, sales will go nuts.
However, a Republican president is still good for gun stocks like SWHC. Supporting the Second Amendment means consumers will still shop for guns.
SWHC has an investor presentation that says that once someone buys a gun, they are likely to buy as many as seven more, and Smith & Wesson is also actively pursuing the law enforcement market.
Stocks to Buy for the RNC and Beyond: Raytheon Company (RTN)
Raytheon Company (RTN) is one of the big names in defense. Even under the Obama Administration, and amidst defense cuts, the sector has still done very well.
The sector ETFs have nearly tripled over the past eight years. RTN itself has risen 160%. If that’s what happened during a Leftist administration, what might happen if the candidate chosen at the Republican National Convention takes over?
Luckily, RTN and defense stocks are not solely dependent on U.S. government contracts, although it continues to win those contracts, like a $291 million one from the Navy. There are other nations that RTN can contract with, as well as private companies.
In addition, the more advanced that weapons, aeronautics, and avionics systems become, the more upgrading they require. This stuff is highly complex, and needs to be repeatedly enhanced, upgraded and redesigned. It’s like a super-complicated iPhone model, if you get the idea.
Stocks to Buy for the RNC and Beyond: Vanguard REIT Index Fund (VNQ)
Real estate, in the form of real estate investment trusts (REITs), should also see an ongoing positive trajectory. The Vanguard REIT Index Fund (VNQ) is a broadly diversified exchange-traded fund with exposure to many aspects of real estate in the US.
Both candidates have said they would spend more money on infrastructure. In fact, Trump said he’d spend a trillion dollars on it and the Republican party is behind him.
Big government spending is always good for developers. With infrastructure spending, jobs should follow. However, the construction industry is already humming along with low unemployment. The St. Louis Federal Reserve says there’s only 4.6% construction unemployment.
Thus, wages will rise, so construction costs will rise, and that usually leads to higher commercial property values, and thus, higher rents. That’s all good for REITs. And rather than pick and choose which REIT to buy, going with the broad ETF is a good choice.
It’s up 250% vs. 180% for the S&P 500 since the financial crisis bottom. The yield is only 3.35%, and you can find REITs that pay more, but the diversification is what gives you less risk. Expenses are 0.12%, or $12 per $10,000 invested.
As of this writing, Lawrence Meyers does not own any of the stocks mentioned.