President Joseph R. Biden Jr. was sworn in as the 46th president of the United States on Jan. 20 in a star-studded event. However, Donald Trump continues to impact the national discourse, particularly when it comes to which stocks to buy.
Whatever you think of the former president, no one can argue he was a polarizing figure. That attitude has extended to the business community. However, the U.S. Capitol storming forced big businesses to take a step back and reassess. Various business groups and individual companies took actions to distance themselves from the pro-Trump mob that attacked the 117th United States Congress. Additionally, many companies suspended political contributions in the wake of the event.
The business world values stability. Hence, these moves shouldn’t surprise anyone. However, it should give investors a chance to pause and reflect on which stocks to buy in this volatile environment. For instance, shares of Twitter (NYSE:TWTR) dropped more than 10% at the market open on Jan. 11 after the social network permanently banned Trump, leading to fears surrounding the financial repercussions regarding the removal.
So, clearly, it’s a tricky time for investors. However, as is the case with any business decision, you should maintain a rational approach to picking stocks among the chaos. Businesses with a wide moat and solid outlooks will continue to do well.
The following list contains five companies that have severed their ties with the president and his family business, the Trump Organization. The companies also happen to be excellent stocks to buy on their own, for their business models and solid returns. They are:
- Deutsche Bank (NYSE:DB)
- Signature Bank (NASDAQ:SBNY)
- Facebook (NASDAQ:FB)
- Salesforce (NYSE:CRM)
- Shopify (NYSE:SHOP)
Stocks to Buy: Deutsche Bank (DB)
Often referred to as “Trump’s bank,” Deutsche Bank will reportedly cease doing new business with Trump or his companies. It’s a surprising move since the multinational bank has stayed with the former president through thick and thin, helping him finance his business empire for decades.
The German multinational investment bank and financial services company must be breathing a sigh of relief. It was the subject of subpoenas by New York prosecutors and was looking for ways to sever ties with the president due to negative publicity stemming from the relationship. It’s worth noting that the former president owes the Frankfurt-based lender more than $300 million.
Now onto some non-Trump news. In the third quarter of 2020, Germany’s largest lender reported a net profit of 182 million euros, resoundingly beating expectations of a 114 million euro loss and the 77 million euro net loss attributable to shareholders in the previous quarter. Total net revenue increased to 5.9 billion euros, compared to 5.3 billion in the year-ago period.
The quarter marks a much-anticipated return to form. The novel coronavirus pandemic heavily affected the financial services industry, from low-interest rates to pressure on bond yields. Still, you pretty much know what you are going to get with Deutsche Bank. It’s an old, established name in the industry, and at 0.8 times price-to-sales, DB stock is an affordable one to have in your portfolio.
Signature Bank (SBNY)
From one lender to the next. New York-based Signature Bank had closed two personal accounts in which Trump held about $5.3 million and called on the president to resign before his term officially ended on Jan. 20. Apart from Trump, SBNY also served Ivanka Trump, Jared Kushner, and Michael Cohen.
Much like Deutsche Bank, Signature Bank is a well-established name that performed consistently over the years. The past year was rough for the company. In the last six quarters, it beat Wall Street estimates just two times. However, things will get better next year. Sales and EPS are expected to grow at 16.6% and 13.6%, respectively. Considering that kind of growth, it’s understandable why SBNY stock is treading at 13.7 forward price-to-earnings.
Out of 21 analysts covering the company, 18 have given either a “strong-buy” or “buy” recommendation. Shares have a 12-month price consensus target of $166 a pop. However, I lean more toward the bull case estimate of $210 per share.
Stocks to Buy: Facebook (FB)
In the wake of the riot, technology platforms were the first business entities that severed ties with Trump. His Facebook page had 35 million followers at the time it was suspended. The social media giant has referred its decision to indefinitely suspend access to his account to its outside oversight board.
Regardless, this is not the first time Facebook found itself in the crosshairs of intense political debate. However, on its own, it’s one of the best stocks to buy, owning the four most downloaded apps of the decade – Facebook, Messenger, Instagram, and WhatsApp. That’s why in Q3’20, the company reported $21.5 billion in revenue, up 22% from the year-ago period and soundly beating analysts’ expectations of $19.84 billion.
Facebook’s recent figures show more than 2.74 billion users, a 12%, year-over-year increase. Daily, more than 1.82 million people are active on the social media platform, also up 12% over the year-ago period. Most importantly, advertising revenue came in at $21.2 billion, a 22% increase from a year ago.
As ace investor Louis Navellier said, that kind of advertising revenue is hard to come by, especially with so many social media businesses operating in the public sphere. That’s why it’s not surprising that FB stock has outperformed the S&P 500 by 65% and its sector by 116.6% in the past five years.
Looking ahead, Mark Zuckerberg’s billion-dollar baby is projected to increase sales and EPS by 24.4% and 12.3% next year. If those targets seem ambitious, then you should keep in mind that revenue and EPS have a five-year growth rate of 34.5% and 46.9%, respectively.
FB stock has a 12-month price target of $325 per share, an 18.4% premium to the Jan. 22 close of $274.50 a share.
Salesforce.com is an American cloud-based software company specializing in providing a customer relationship management service. The business software maker owns the email marketing firm used by the Trump campaign and the U.S. Republican National Committee (RNC) to send emails. The company has said it had “taken action” to prevent its tools from being used by the RNC for the time being.
Salesforce has not gone into specifics regarding the preventative action taken regarding the RNC, which is a long-standing customer. Losing Salesforce tools is a major blow. It’s a dominant force in customer service, marketing automation and analytics.
That’s part of the reason why it’s one of the best stocks to buy. Relative to the S&P 500 baseline, CRM outperformed the S&P 500 by 98.3% in the past five years. In the last 12 quarters, the San Francisco-headquartered company has beat analysts’ expectations 10 times. In the last two quarters, it has delivered earnings beats of 388.5% and 394.7%. And that’s not surprising.
While the pandemic has wrecked the operations of several businesses, CRM has actually seen usage rates surge. As more companies shift their work online, demand for its products and services will only increase. This is precisely why revenue is expected to jump 20.3% in the next year. Analysts expect the share price to increase by 21.8% in 12 months. And of 42 that are covering the stock, 34 are bullish on its prospects.
Valuation is an issue. CRM stock trades at 68.7 times forward P/E at the time of writing. However, tech stocks typically have sky-high valuations, especially with the pandemic acting as a tailwind. There are few, if any, chinks in CRM’s armor. So, the premium valuation is justified.
Stocks to Buy: Shopify (SHOP)
Canadian e-commerce software provider Shopify removed online stores run by the Trump Organization and Trump campaign from its sites in response to the riot at the U.S. Capitol. A Shopify spokeswoman said Trump violated its policy, prohibiting retailers from promoting or supporting organizations or people that promote violence. “As a result, we have terminated stores affiliated with President Trump,” the company said.
The company previously defended the rights of any customer to use the platform. Chief Executive Tobias Lütke wrote back in 2017 that “commerce is a powerful, underestimated form of expression.” However, earlier this month, it looks like the events taking place were the straw that broke the camel’s back.
Regardless, SHOP is a big e-commerce brand now. When a stock trades at 328.3 times forward P/E, you know that investors really like it. Revenues have grown consistently, and the momentum will not stop. Sales are expected to rise 140.6% in 2021. Meanwhile, the company delivered 11 quarters of earnings beats in the past 12. You can well and truly understand why investors are going gaga over SHOP stock.
E-commerce is benefiting from secular trends, and we expect the pie only to get bigger moving forward. But out of 33 analysts covering the stock, 16 have it at “hold” and it’s easy to understand why. There is a steep gap between valuation and fundamentals. Still, it’s on my list of stocks to buy. That doesn’t make SHOP stock a bad investment. It just means that you should wait for a better price point to take a dip.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.