Donald Trump may have been given his fair share of wealth by his father when he took over as president of Trump Management Co. in 1974, but it's what Trump has done with his portion of an estimated $40 million in wealth since that time that has marveled investors.
By his own account, Donald Trump is worth $10 billion today. Bloomberg and Forbes have estimated Trump's net worth at a more modest $2.9 billion and $4 billion, respectively. But the point being that no matter how you manipulate the numbers he's done an incredible job at building wealth over the last four-plus decades.
Common traits of Trump stocks
As we saw this past summer with Trump required to disclose his financial holdings as part of Federal Election Commission rules, he currently owns somewhere in the neighborhood of $33.4 million and $87.9 million worth of stocks across five separate brokerage accounts. The reason for the huge variance relates to the financial filings themselves -- they only require a range be given for value rather than specific numbers.
Despite Trump spreading around his investments between four firms (he has two accounts with Deutsche Bank) and dozens upon dozens of equities, three common traits emerge.
1. An affinity for large-cap stocks
First, Donald Trump prefers large-cap stocks. Going by the concrete definition of a "large-cap stock," we're talking about companies with a market valuation of $10 billion or more. A quick glance at what appears to be well over 100 unique stocks in Trump's portfolio yielded very few companies that fit the definition of a small-cap stock ($1 billion or less). One is Kronos Worldwide, a manufacturer of titanium dioxide whose shares have fallen by nearly 75% over the trailing two-year period. It currently has a market cap just shy of $500 million. With the exception of Kronos, WhiteWave Foods, a distributor of packaged foods with a $6.5 billion valuation, and perhaps a few other names that could be counted on one hand, no other holdings are below the $10 billion market value threshold.
Why is Trump fixated on large-cap stocks? The allure has to do with large-cap companies having a proven track record. In other words, these companies wouldn't be worth as much as they are today if their long-term outlook and business model didn't have staying power. Buying large-cap companies normally helps reduce volatility and can potentially protect some of your capital during economic downturns.
2. A love of strong brands
Secondly, a common theme among Trump's five brokerage accounts is that he prefers companies with a strong brand presence. Some of his holdings may not exactly have a consumer-facing presence, such as Barrick Gold, but a majority of Trump's holdings do indeed have strong brand appeal which tends to drive growth.
For example, technology giant Apple (NASDAQ:AAPL) appears in both of Trump's Deutsche Bank wealth management accounts, as well as a J.P. Morgan brokerage account. Based on the addition of the ranges provided in his financial filings, "The Donald" owns between $1.35 million and $2.75 million worth of Apple stock.
Why Apple? According to Interbrand, a research company that values brands based on a proprietary formula, Apple ranked as the most valuable global brand for a third consecutive year. It increased its brand value by 43% in 2015 to $170.3 billion. Brand appeal can be critical to driving customer loyalty, and loyal customers often are the source of the best margins since they'll shop with a lesser regard for price. If you need any proof of this, just go stand outside your local Apple store when a new product is released and count how many hundreds of feet the line extends.
Of course it's not just Apple. You'll also see consumer-facing, brand-name juggernauts like PepsiCo., Ford, CVS Health, Visa, and Costco Wholesale, just to name a few, in Trump's portfolio.
3. An attraction to dividend-paying companies
The last common theme is that the company's Trump invests in often pay a dividend, which really shouldn't be too surprising since he likes large-cap, established companies with strong brand appeal.
Dividends are the foundation of which great retirement portfolios are built, and they often act as the silent messenger for companies. Recurring or growing dividend payments can alert investors to the strong financial performance of a business, and establish the fact that a business's outlook is strong enough that it can share a percentage of its profits with shareholders. Dividends can also help hedge your downside risk when the stock market undergoes a correction, just as we've witnessed this month. Most importantly, dividends can be reinvested back into more shares of dividend-paying stocks, thus magnifying your dividend payouts and compounding your gains over the long run.
Within Trump's portfolio he has some big dividend hitters. U.S. telecom giant Verizon Communications (NYSE:VZ) is one you'll find in Trump's portfolio, and possibly in retirees' portfolios as well I'd surmise. Verizon boasts a yield north of 5% because it operates in a market with very high barriers to entry and only a handful of truly on-par competitors. This lends to strong pricing power for Verizon across all of its content avenues, including wireless, TV, and Internet.
You can invest like Trump, too
The best part about the stock market is that there's an investment opportunity for every investor out there, regardless of whether you throw caution to the wind or are afraid of every downtick in the stock market on a day-to-day basis, or if you have $1 million or $100 to invest.
If you want to invest like Trump, but you're not working with Trump's bankroll, consider the Vanguard Large-Cap ETF (NYSEMKT:VV) as a smart alternative. ETFs, or electronic-traded funds, are baskets of stocks all owned within a fund and run by a manager. It's like having your own mutual fund, but it's traded just like any other stock.
The Vanguard Large-Cap ETF, in particular, has a whopping 646 holdings in its portfolio, so it's incredibly well-diversified, it pays out a yield of roughly 2%, which is in-line with the broader market averages, and its annual expense rate is a menial 0.09% per year. It gives you a focus on large-cap, brand-name, dividend-paying companies that Trump loves, and it could be your ticket to a comfortable retirement.