Five industry leaders you need to own in 2017

 

The holiday season is a busy time of year. In addition to preparing for the upcoming holidays, investors also have to handle year-end bookkeeping while making plans for the upcoming year.

It can be one of the more stressful times of the year, but you rally have to be able to put some time aside to look ahead, and have a rough idea on which sectors, and stocks within those sectors, you want to focus on in the year ahead.

With Donald Trump’s unexpected victory in the recent U.S. presidential election, the outlook for the market is much different than it would have been otherwise. Not only did Trump win the White House, but Republicans won control of both houses of Congress, which should make it easier for Trump to put his economic agenda in action.

As such, if you want to make a plan for the upcoming year, you really need to figure out which sectors are most likely to benefit in a Trump presidency, and then pick leading stocks within those sectors.

The following five sector leaders are great stocks to consider holding next year.

United States Steel Corp.

While campaigning for the office of president, one of Trump’s biggest pledges was to significantly boost federal spending on infrastructure projects. Trump not only plans to boost spending on infrastructure, he also has some vision of building a wall along the Mexican border. It is likely that Trump will not spend as much as promised on infrastructure, and whether or not he moves forward with his plan for a wall on the Mexican border, there will be some increase in federal spending on infrastructure, which will boost demand for steel. Since steel is used in virtually every construction project, the steel sector looks very attractive right now, and United States Steel Corp. (X) is a clear leader in the sector.

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Chart courtesy of www.stockcharts.com

Chevron

After a couple of tough years, the oil and gas sector is once again looking attractive. Trump is expected to ease restrictions on the sector, as well as open federal lands for additional exploration. OPEC and a handful of non-OPEC countries have agreed to production cuts, which should help the precious crude build on recent gains. Oil stocks have already rallied this year, but if oil prices continue to move higher, which they should as production cuts kick in, stocks in the sector will trend higher through the upcoming year. Chevron (CVX) is a leader in the sector, and the stock will build on recent gains as oil prices rise.

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Chart courtesy of www.stockcharts.com

BB&T Corp.

The Federal Reserve could announce a shift in interest policy as early as this week, but even if the Fed does not lift rates at this month’s meeting, it is widely believed that it will lift rates in the very near future. The Fed has signaled that it believes the overall economy has improved to the point where a rate hike is warranted, and Donald Trump has made it clear that he wants to see higher rates once he assumes office. Regional banks such as BB&T Corp. (BBT) are a great way to play rising interest rates, since they are able to widen the spread on the money they borrow versus the money they loan out to customers. Anticipation of higher rates has already pushed stocks in the sector higher, but if we see a series of rate increases over the upcoming year, there is still a lot of upside potential for all the names in the sector.

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Chart courtesy of www.stockcharts.com

Boeing

Despite being on the receiving end of a Trump Twitter attack, aerospace and defense contractor Boeing (BA) remains in the upper end of its 52-week range, and has the potential for big gains while Trump in in control of the White House. The president-elect has big plans for beefing up the U.S. military, which will benefit all the major players in the aerospace and defense sector. BA is just shy of its all-time high, but the stock has a P/E of just 23.8, so valuation is not a huge concern at this point, especially with earnings forecast to rise 32.6% next year. With Republicans in control of the White House and both houses of Congress, Trump will have an easy time advancing his plans to expand the military, which will drive the entire sector higher.

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Chart courtesy of www.stockcharts.com

Coach

Among the many things expected to occur during a Trump administration are tax cuts. Top earners are expected to enjoy tax cuts, with the expectation being that the extra income will be used to purchase more goods and services. High-end retailers like designer handbag maker Coach (COH) stand to benefit from the extra discretionary income. Another promise Trump has made is to be tougher on counterfeit goods entering the country, which is another reason to get behind Coach. Analysts forecast Coach earnings to rise by 8.1% this year, and 12.1% next year, and with a forward P/E of just 15.9, there is plenty of reason to expect COH to trend higher through the upcoming year.

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Chart courtesy of www.stockcharts.com

Symbols: BA BBT COH CVX X
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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