Joe Biden has been sworn in as the 46th president of the United States. That means, among other things, that former President Donald J. Trump now has a lot more free time on his hands.
Far be it for us to say what he might want to do with that free time, but as he has noted repeatedly, stocks have had a pretty good run over the past few years. As president he would have been discouraged against buying individual shares, but now that Inauguration Day has come and gone he has a lot more flexibility.
Here's why three Fool.com contributors would recommend now private citizen Donald Trump consider General Dynamics, Ford Motor (F 3.23%), and Amazon.com (AMZN 4.03%) if he does decide to open a brokerage account in the weeks to come.
Can I interest you in a new Gulfstream, Mr. Trump?
Lou Whiteman (General Dynamics): As president, Trump described Pentagon spending levels as "crazy." But defense spending did increase during his time in office. Defense investors spent most of last year worried that government spending levels were bound to plateau in the years to come no matter who was in the White House, causing defense stocks to underperform in 2020.
Given the potential for budgetary pressures in the years to come it's a good time to be selective about defense stocks, and General Dynamics looks like a winner no matter what happens. The company's commercial aerospace business, Gulfstream, should benefit from an expected surge in business jet sales as current fleets begin to come up on retirement ages. By early 2022 Gulfstream will have a completely refreshed product line to sell, which should mean falling research and development costs and better profitability for the unit.
Gulfstream's defense business is also set up well to shine. Its Columbia-class ballistic missile submarine is one of the Pentagon's most urgent priorities, and should survive any Washington budget battle even though it is likely to be the most expensive shipbuilding project in world history.
General Dynamics also has one of the industry's top defense IT businesses. Last time there were budget battles IT providers took it on the chin, but with the Pentagon decreasing overseas troop deployments and cyberattacks constantly in the news lawmakers are unlikely to skimp on tech modernization this cycle.
|Company||Price/Earnings Ratio||Price/Sales Ratio|
|General Dynamics (GD 0.55%)||13.82||1.150|
General Dynamics comes into 2021 priced at a discount to its large defense prime competitors, and offers a dividend that currently yields 2.8% and has room to run higher. General Dynamics expects free cash flow to top net income by 2022 if not before, giving it plenty of ammunition for buybacks and dividend boosts.
Few luxury items are more on-brand for Trump than a shiny new Gulfstream jet. Adding the stock of Gulfstream's parent to his portfolio would be a shrewd move by the former president.
A great time to buy one of America's great companies
John Rosevear (Ford Motor Company): The former president always seemed to have a soft spot for Ford, and this is actually a good time to be thinking about an investment in the iconic American automaker. For starters, auto sales in the U.S. and Europe are likely to be on an upswing in 2021, as the COVID-19 pandemic (hopefully) recedes and Western economies get back to positive territory.
That bodes well for all automakers, of course. But it bodes especially well for the Blue Oval, which -- as it did in 2010 and 2011 -- is hitting the sweet spot of its new-product cycle at just the right time. Consider:
- A brand-new iteration of Ford's most profitable product, the F-150 pickup, began shipping at the end of November. It's selling very quickly at strong prices, and that's likely to continue for at least a few quarters.
- SUVs: Ford's stalwart Explorer and Escape are still fresh, the brand-new Bronco Sport is selling very well, and the much-anticipated Bronco is coming in a few months.
- The electric Mustang Mach-E is now arriving in U.S. showrooms, and interest is very high. Ford is likely to sell all it can make for at least the next year, and possibly longer.
As a general rule, the automakers with the freshest product tend to get more sales and generate higher margins. The fact that Ford will have fresh products in several of the hottest market segments just as buyers return to showrooms is extremely bullish.
Add in the work that CEO Jim Farley has done to bring Ford's costs down, the likely return of Ford's dividend later this year, and Ford's still-reasonable valuation, and I think there's an excellent chance that the former president -- and auto investors generally -- will be pleased by the returns on Ford stock over the next couple of years.
Maybe Trump didn't like Amazon before -- but he should love Amazon stock now
Rich Smith (Amazon.com): Trump was famously not a fan of Amazon.com while he was in office. But maybe -- just maybe -- now that he's out of office and once again free to invest as he likes, ex-President Trump should consider buying some Amazon stock.
Over four years in office, the former president criticized Amazon repeatedly on Twitter for not paying enough taxes, and even labeled the company a "no-tax monopoly." He blamed the U.S. Postal Service's recurring annual losses on Amazon, saying that USPS "delivers packages for Amazon ... very below cost."
And I can certainly understand how, in his role as president and the guy ultimately in charge of the Post Office, that that might have irked Trump. But from the perspective of an investor, finding a company that pays low taxes, has won great rates from the Post Office, and is about as close as you can get to a monopoly in e-commerce today -- well, that sounds like a pretty great stock to own!
Thanks in some small part to these efforts -- but in larger part to its having simply built a great business -- Amazon.com now ranks among the top three most valuable companies in America. It generates massive profits according to generally accepted accounting principles (GAAP) -- $17.4 billion over the last 12 months -- and even more massive amounts of cash -- $24.7 billion in positive free cash flow.
Granted, at a P/E of 94, no one would accuse Amazon of being a cheap stock. But it's just as clear that Amazon didn't win this valuation by accident. Amazon.com is quite simply an American success story.
In fact, at this very moment, President Biden is probably pondering an offer, made public by Amazon on Wednesday, to partner with the e-commerce giant in an effort to accelerate the delivery of coronavirus vaccines to millions of Americans. The new administration could find a lot worse partners to help solve its logistics problems than a company that shipped 4.5 billion packages in 2019, and delivered the majority of those packages itself.
An individual investor could find a lot worse ideas for investment, too.