The 2016 race for the Republican Party presidential nomination started in earnest Monday, as Ted Cruz made his announcement official. The fiery Texas Senator actually took a page out of Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk’s playbook by using Twitter to make the initial announcement.
Cruz then made his first official speech as a presidential candidate on Monday to an audience of primarily students of Liberty University in Lynchburg, Virginia. In his speech, which was delivered without the assistance of a teleprompter, Cruz called himself a “courageous conservative” whose agenda includes repealing the Affordable Care Act (a.k.a Obamacare), promoting Second Amendment rights, implementing a much more hawkish foreign policy and abolishing the Internal Revenue Service in favor of a flat tax.
Stated differently, a President Ted Cruz would mean guns, bigger guns and lower taxes.
Stocks to Watch Under the Cruz Administration
For investors, a President Cruz could be a boom for all sorts of industries. Gun manufacturers such as Smith & Wesson Holding Corp (NASDAQ:SWHC) and Sturm, Ruger & Company (NYSE:RGR), as well as gun retailers such as Cabelas Inc (NYSE:CAB) and Wal-Mart Stores, Inc (NYSE:WMT) would most likely get a boost from a pro-Second Amendment voice in the White House.
They also would likely rest a bit easier knowing that draconian new federal gun restrictions would likely be off the table.
On the flip side of the gun coin is the fact that gun sales have soared during the Obama administration, and particularly in the first year after the president’s re-election. Many Americans were fearful that the president’s pro-gun control policies would result in severe restrictions on the right to purchase and own semi-automatic rifles, or so-called “assault” rifles, and that led to a big spike in the share prices of SWHC and RGR.
As for the really big guns such as those needed to implement the more muscular foreign policy that Ted Cruz advocates, look for defense contractors such as those in the iShares U.S. Aerospace & Defense ETF (NYSEARCA:ITA) to get the nod.
Top companies in this ETF such as Boeing Co (NYSE:BA), Lockheed Martin Corporation (NYSE:LMT) and General Dynamics Corporation (NYSE:GD), along with many others, would be big winners in a Cruz administration.
On the tax front, a serious move to streamline the onerous accounting nightmare that is the current federal tax code and move to a flat tax would be a major boom to just about every corporation and individual taxpayer. In fact, unless you work in the accounting industry — or you own stocks of tax-preparation firm H&R Block Inc (NYSE:HRB) or tax prep software maker Intuit Inc. (NASDAQ:INTU) — you probably would see a massive surge in the value of domestic stocks at large.
In particular, small-cap stocks, which derive most of their revenue domestically, would likely be the biggest sector winners under a President Cruz. In fact, if Cruz were elected to the highest office in the land, I would immediately get long small-cap ETFs such as the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) and the iShares Russell 2000 Growth Index (ETF) (NYSEARCA:IWO).
As for healthcare and the Cruz wish list, it’s hard to say what a repeal of the current ACA would mean to the sector. Certainly health insurers such as UnitedHealth Group Inc. (NYSE:UNH), Anthem Inc (NYSE:ANTM) and Aetna Inc (NYSE:AET) might come under pressure. On the other side of the ledger would be medical device makers such as Medtronic plc (NYSE:MDT) and Covidien plc (NYSE:COV), as they would likely be removed from the specter of Obamacare regulations.
We’d also likely see less regulation in sectors such as biotech, which means even more continued upside for a sector ETF such as the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB).
Bottom Line
Of course, all of this winners and losers speculation is extreme in its prematurity; especially given the election is more than a year-and-a-half away. Yet with the first official announcement from a major contender from the GOP, it’s not too early to start looking far down the road to what a new president would mean for your portfolio.
Like the old adage says, the early bird catches the worm.
If that early bird turns out to be President Cruz, remember that you heard it hear first.
As of this writing, Jim Woods was long IWO and TSLA.
