My top 10 Australian shares to profit from the Trump effect

After the shock U.S. election victory of Donald Trump investors have been eager to predict what companies or sectors may benefit from the new president’s expected legislative or policy moves.

Trump’s nailed on policies appear to be cutting company and personal tax rates and spending more on an ‘infrastructure boom’ to be funded via federal debt.

The deregulation of banks, big business, and employment laws are other likely legislative initiatives that may benefit some ASX-listed companies with operations in the US.

Another common expectation is that US cash rates may incrementally rise sooner than expected, which should mean rising yields on money market securities and medium-dated US government debt. This should benefit companies that invest heavily in these securities and asset classes.

Below, I have 10 potential winners leveraged to the consequences of some of Trump’s expected legislative and policy moves.

  1. Macquarie Group Ltd (ASX: MQG) could benefit from deregulation of the banks via lower regulatory compliance costs, while it is also heavily leveraged to infrastructure asset management and debt capital markets in the US which could prove a Trump card for the bankers’ top line.
  1. Computershare Limited (ASX: CPU) is a clear beneficiary of a higher cash rate environment in the US as it will receive a greater return on the giant amount of funds it holds on behalf of clients as a global share registry and fund custodian.
  1. QBE Insurance Group Ltd (ASX: QBE) is the accident-prone insurer that should also be a net beneficiary of higher US interest rates given the increased return it gets on the float it invests into US debt and money markets. Its general insurance and reinsurance businesses in North America also have an opportunity to reverse their recent underperformance.
  1. Iress Ltd (ASX: IRE) could benefit if the major US banks and their asset management arms are set to enjoy an easier regulatory ride and greater profitability. Iress is a major client of many US banks and larger operating budgets across the financial services industry is good news for businesses like Iress.
  1. Mayne Pharma Group Ltd (ASX: MYX) is the pharmaceutical drugs retailer that may benefit from the deregulation of US drugs markets in terms of price controls. If companies like Mayne Pharma have less regulatory pressure on what they can charge for drugs it is likely to support their bottom lines.
  1. James Hardie Industries plc (ASX: JHX) is the home and commercial property builder that generates around 80% of its profits via sales in North America. Its building products and services could be in demand in the years ahead give Trump’s planned construction boom.
  1. BHP Billiton Limited (ASX: BHP) features as this list would not be complete without a miner and BHP has substantial interests in the materials required to fuel a construction boom including the key steel-making ingredient of iron ore.
  1. Nearmap Ltd (ASX: NEA) is an aerial-mapping business leveraged to an uptick in US government spending and public or private sector construction activity. It also has a profitable Australian business helping fund its expansion in the US and looks a hot tech stock to watch.
  1. Challenger Ltd (ASX: CGF) if you assume a Trump presidency will add to volatility in financial markets then more Australians may seek the security of Challenger’s annuity products over liquid capital and equity markets that carry significant risk. Trump aside, Challenger has two powerful tailwinds in the ageing population and growth of the legally mandated superannuation sector in Australia.
  1. Amcor Ltd (ASX: BXB) is the packaging business that is reasonably defensive and offers exposure to strength in the US dollar and manufacturing. It’s the kind of business that is likely to attract capital if cash rotates out of bonds and into equities as some expect given that Trump’s presidency could lead to a faster-than-expected rise in US cash and treasuries rates.

As a footnote it’s important to note that investors should not buy shares in a company because it may benefit from a change of government. Out of the companies above I would be inclined to buy Challenger given current valuations, while investors willing to take on significant risk in pursuit of higher returns could look at Nearmap.

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Motley Fool contributor Tom Richardson owns shares of Challenger Limited, Iress, Macquarie Group Limited, and Nearmap Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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