Former President Trump’s improving odds of a second term have already influenced investor behavior. The “Trump trade” is gradually being priced into various sectors.
However, there is a long way to go for some undervalued Trump stocks that are still poised to benefit from his potential victory.
Market volatility has risen with President Joe Biden stepping back and Vice President Kamala Harris’ inevitable nomination. Still, recent PredicIt consensus shows Trump narrowing his edge slightly over Harris, giving him a 57% chance of winning, instead of 58% prior.
Trump’s historical support for the oil and gas industry, advocating increased drilling and reduced regulations, could boost certain players in the field. His past backing for the domestic steel industry through tariffs and trade policies may also favor U.S. producers.
Moreover, his recent support for Bitcoin (BTC-USD) could also lead to favorable regulatory changes.
As the election approaches, trends may intensify. This could benefit undervalued Trump stocks that are aligned with his policy priorities.
Halliburton (HAL)
Halliburton (NYSE:HAL) presents an obvious investment opportunity. This is especially true as the leading oilfield services company is heavily exposed to a deteriorating U.S. market.
A potential Trump victory could see a rapid shift in well production and boost HAL’s production growth. Increased infrastructure spending could also boost energy demand, indirectly benefiting Halliburton through higher oilfield activity and service demand.
HAL’s financial metrics paint a strong picture. The company boasts a 17.7% operating margin, with quarterly earnings growth of 16.2% year-on-year. It returned 28.9% of its equity to investors and maintained a free cash flow of $1.89 billion to finance new activities.
Despite falling in the wake of its earnings report due to missing revenue estimates, analysts project an average price target of $44.55 per share. This suggests that HAL stock currently trades about 23% below its fair value.
Meanwhile, analysts project sales growth of 11.30% for the current quarter, indicating better prospects for future performance. A lower forward price-to-earnings ratio of 11.43 times indicates this may be one of the undervalued Trump stocks relative to its growth prospects.
Steel Dynamics (STLD)
Steel Dynamics (NASDAQ:STLD) is another undervalued Trump stock poised to benefit from a Trump 2.0 administration.
Trump’s improved polling numbers prompted investors to price in the possibility of his proposed 10% tariffs on all imports if he is re-elected. This would make imports more expensive, boosting demand for domestically produced steel.
Analysts suggest that Steel is undervalued, trading at a discount compared to industry peers. STLD stock trades around 7.5 times its estimated EBITDA, which is lower than a recent industry transaction. Its P/E is also much lower than the industry average of 15.22 times at 10.40 times.
The company’s strong financials are apparent in its recent quarterly results. It reported revenues of $4.63 billion, 4.3% ahead of forecasts, and EPS of $2.72, which beat estimates by 2%. Despite analysts lowering their EPS estimates for next year, they kept the STLD stock price target unchanged.
Although the STLD price was punished for reporting negative quarterly revenue and EPS growth year over year, it still trades up 23% yearly. It posted double-digit margins and returned hefty assets and equity to investors, making it an attractive candidate.
Marathon Digital (MARA)
Trump’s recent favorable stance on Bitcoin could lead to regulatory changes affecting Marathon Digital (NASDAQ:MARA). This is especially true as the Supreme Court recently abolished the Chevron deference legal doctrine.
The ruling allowed the SEC to interpret laws that were ambiguously defined by Congress. Experts suggest its abolition may influence how the SEC classifies assets and open up new avenues for MARA.
As the “Trump trade” continues to be priced into the market, MARA stock may see increased interest from investors looking to capitalize on Trump’s victory and increased Bitcoin adoption. Notably, Trump has nominated Bitcoin proponent Sen. J.D. Vance as his running mate.
Despite projections of a $0.14 per share loss for the current quarter, the company’s outlook remains promising for the current year at an EPS of $0.98 per share. MARA delivered quarterly earnings growth of 184.1% YOY, operating margin of 246.4% and returned 31.74% in equity.
Analysts estimate MARA stock fair P/E at 39.37 times, significantly higher than its current P/E of 13.48 times. This discrepancy suggests this is a highly undervalued Trump stock, particularly considering its efforts to leverage waste heat and aim to double its hash rate this year.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
