Summary

• Markets often quickly price in obvious news, but sentiment and long-term fundamentals like product quality and competitive advantage are key for stock performance.

• Stocks linked to Trump's allies have seen significant gains, but some like Roivant Sciences and Liberty Energy haven't yet outperformed and could benefit from deregulation.

• Tesla's 70% post-election surge seems unjustified; it's time to take profits and look for better entry points.

• Roivant Sciences and Liberty Energy are top buys due to potential growth under Trump's administration despite not yet reflecting the Trump bump.

Hands holding American flag

It's scary when I remember I've been investing in stock markets for over 25 years. Over that time, I've come to the conclusion that markets price in obvious news quite quickly. However, often that news is sometimes over-priced or under-priced.

Variables like interest rates are very important, as are tax rates. Sentiment is also key in the short term. In the long term, the quality of a company's products and services, and a sustainable competitive advantage are key. In the short term, a lot of news can be more noise than signal.

A recent Economist article on cronyism got me thinking. Crony capitalism is described by the Merriam-Webster dictionary as "an economic system in which individuals and businesses with political connections and influence are favored (as through tax breaks, grants, and other forms of government assistance) in ways seen as suppressing open competition in a free market".

The Economist concluded that while individuals and companies could benefit from cronyism, the jury was out on whether crony capitalism would be good for an economy overall. The article implied that lobbying and gaining Donald Trump's favor would be important now for companies operating in the US and that the stock market has already rewarded companies linked to Trump's allies. Indeed, in recent days there have been news reports of many companies donating to President-elect Trump's inauguration fund. See this Wall Street Journal article about some technology companies doing this.

The Economist article, titled Everyone has their price, got me thinking however about companies with deeper ties to Trump. The article mentioned Elon Musk, Peter Thiel, and also Donald Trump Jr. Since his election win, Trump has tapped up quite a few businessmen for roles.

I have looked at the performance of the stocks associated with those individuals, relative to the S&P 500 Index (SP500) performance, and we got some interesting results. My takeaway is that some obvious stocks have rallied really hard, and probably too much. However, there are some other stocks, which might be less obvious, that haven't performed as well, but could in theory benefit from the Trump administration's focus on deregulation.

Trump is Trump

Obviously, prior to the election, the most obvious stock to play was Trump Media & Technology Group Corp. (NASDAQ:DJT) with the ticker of Donald J. Trump's own initials. It has been widely reported that the stock market, in the weeks leading up to the election, had started to price in a Trump victory. Probably because polls were 50/50, but stock market participants accounted for the bias in polling due to the "shy Trump voter" phenomenon.

On October 8th, DJT traded at $22, by election day it was up to $34, up 56%, while the S&P 500 was up less than 1% over that time period. Now DJT trades just over $35 at the time of writing, so since the election the S&P 500 is up about 1.5% and DJT is up another 4%.

Interestingly, Trump Media & Technology Group is not only a social media platform with Truth Social, TMTG+, and TMTG News brands, but the company operates through a newly opened data center and plans to bring more data centers into operation.

Fundamentally speaking, however, the stock is up about 60% since October 8, when the S&P 500 is up just over 2%, so I believe the Trump bump on Trump Media & Technology Group has already played out.

Chart

Donald Trump Jr. - PSQ Holdings

On December 3, it was announced Donald Trump Jr. would be joining the board of PSQ Holdings, Inc. (PSQH). The stock price more than doubled on the news. The company runs PublicSquare.com and has three segments: Marketplace, Brands, and Financial Technology.

Normally, I would say that a new board member should not warrant such a large increase in a company's stock price. But on this occasion, with PSQ Holdings, Inc. being a small-cap company, the publicity this brings to the platform and the new MAGA customers to the "woke-free" marketplace website might warrant this magnitude of price rise as sales could increase a lot. For investors interested in small-cap stocks, it might be an interesting one to watch, but I can't see a longer-term benefit of Donald Trump Jr. assisting the company, other than normal board duties.

Chart

Elon Musk - Tesla

Then there is obviously Elon Musk. Time magazine said Musk's interest in Trump was to aid his dreams of reaching Mars. That might be good for SpaceX, which is a private company. Tesla, Inc. (TSLA) has outperformed the S&P 500 by over 70% since the election day. Interestingly, Tesla was only up about 3% between October 8 and election day, so unlike DJT, investors didn't price in any huge upside for the company. My view is that Tesla is a global company, it is already established and the value of the stock is more dependent on long-term views around EVs, autonomous vehicles, renewable power, and robotics. A friendly four-year presidency would matter, but does it justify over 70% extra market capitalization value since the election? This may be an example of Tesla's liquidity and visibility and Elon Musk's visibility being the catalyst for this market run. I like Tesla as a company and I understand its high valuation, but I think this recent 70% run is unjustified. It might be time to take profits from Tesla and look for a better entry point.

Peter Thiel - Palantir Technologies

The Economist article also mentioned Peter Thiel. Thiel is Vice President-elect JD Vance's mentor, having previously hired him for a venture capital role. Thiel is a co-founder and large shareholder in Palantir Technologies Inc. (PLTR). While Thiel himself is not in the Trump administration, and according to The Hill, isn't interested in joining the administration, he has "had a long, collaborative relationship" with JD Vance according to Forbes.

Chart

Palantir has four principal software platforms, Gotham, Foundry, Apollo, and Artificial Intelligence Platform. In short, it is a defense tech company utilizing artificial intelligence. The company could do well as Trump pushes NATO countries to spend more on defense. The stock rallied going into the election and then rallied hard after the election and has outperformed the S&P 500 by over 38% points since election day. Generally speaking, I don't like to bet against super smart people like Peter Thiel, but the recent market rally makes me think the stock could be over-hyped in the short term and a better entry point awaits. However, in the longer term, the stock could be a real winner given the global geopolitical environment and the company's edge in data analytics. It's worth reading this Seeking Alpha article by a fellow author, on the stock which is a Seeking Alpha Editor's Pick.

Vivek Ramaswamy - Roivant Sciences

You will already know Vivek Ramaswamy will be working with Musk, heading the Department of Governmental Efficiency ('DOGE'). But, you may not know that Ramaswamy founded biotech Roivant Sciences Ltd. (ROIV) and still owns 10.5% of the company.

Roivant Sciences is one of the few stocks that has not seen any Trump bump. In fact, it has been roughly flat since the election and has therefore underperformed the S&P 500. Clearly, biotech stocks are risky and are sensitive to their own idiosyncratic news flows. But it seems to me that biotech stocks, given how highly regulated they are by the Food and Drug Administration, should benefit from the deregulation wave set to hit America.

Chart

According to the company profile in Seeking Alpha, the company "engages in the development and commercialization of medicines for inflammation and immunology areas."

The stock has a market cap of about $8.5 billion. A fellow Seeking Alpha author writes that despite risks, "Roivant's diversified late-stage pipeline and robust financials promise significant growth potential." It's worth reading her recent Buy rating article here. For me, the stock is a speculative Buy. The Ramaswamy connection could prove useful, and the stock hasn't seen any meaningful price performance leading up to or following the election, despite Ramaswamy's DOGE role. The fact that Roivant Sciences is uncorrelated with the more popular Trump trades also really interests me. A hidden gem, perhaps?

Chris Wright - Liberty Energy

Liberty Energy Inc. (LBRT) is another stock that, I think, should do really well under the Trump administration, but the market has not priced this in, which surprises me. Going into the election, Liberty underperformed the S&P 500, and from October 8th until the time of writing, Liberty underperformed by 12.7%. Since the election date, the stock is up just under 2%. We didn't know for a few weeks that Liberty founder Wright was going to be the pick for Energy Secretary. Liberty Energy is an integrated energy services and technology company focused on fracking.

Chart

I believe Wright, as Energy Secretary, is going to try to help implement Treasury Secretary elect Scott Bessent's goal of achieving three million barrels a day more crude oil production in the US. Indeed, Wright has written a manifesto of sorts that is a must-read for US energy investors. It is titled Bettering Human Lives and discusses the "tradeoffs at the nexus of energy, climate, poverty, and prosperity". It certainly provides strong clues as to how Wright thinks and the pro-oil and gas production policies he is going to implement. This extra production is, all else equal, going to be bearish for oil and gas prices, but it will be bullish for volume growth and hence the oil and gas services sector will benefit. Fracking firms like Liberty Energy should really benefit. The Wall Street Journal has a good article about Wright which is worth reading. A fellow Seeking Alpha author discusses the investment opportunity in Liberty in detail here. I agree with his Buy rating.

If Wright gets confirmed as Energy Secretary, as seems likely, it supports my bullish thesis on the US energy sector, and I recommend Chevron Corporation (CVX) - see my CVX Strong Buy recommendation, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) - see my IEO Strong Buy recommendation and finally the Energy Select Sector SPDR Fund ETF (XLE) see my XLE Buy recommendation.

Fox Corp - various individuals

Fox Corporation (FOX) has outperformed the S&P 500 by about 19% since October 8th and 13% since the election date. Trump is bringing in at least a couple of Fox News presenters into his administration, and we all know about Trump's relationship with Fox News. It's not clear to me why Fox Corp should outperform so much, although FOX is up nearly 70% year to date. Has Trump driven ratings that much? Again, it might be a liquidity and visibility thing, or there might be other factors at play. While Trump is clearly good for FOX overall, that seems to be priced in already, so I agree with a recent Seeking Alpha article that FOX is probably a hold now, read that analysis here.

Chart

Jared Isaacman - Shift4 Payments, Inc.

Jared Isaacman has been picked by Trump to lead NASA. This has Elon Musk written all over it. Jared Isaacman is the CEO of Shift4 Payments, Inc. (FOUR) which is an independent provider of software and payment processing solutions. I don't see the link with NASA for the company or its sector, and the stock has outperformed the S&P 500 since election day by about 9%. This may have nothing to do with the election or Isaacman's NASA nomination. Isaacman is however an avid pilot and astronaut, as well as being a successful entrepreneur, so this pick has some logic. The stock in fact fell on the announcement, perhaps a key-man risk at Shift4 Payments then.

What might be positive for Shift4 Payments from a government policy perspective, however, is Musk's overall influence and Trump's interest in financial technology and digitalization. Because I can't see the link between NASA and Shift4 Payments or the broader transaction and payment processing services sector, the link between Trump/Isaacman and Shift4 Payments isn't so strong, and while interesting news, I have a neutral opinion on FOUR. That said, a fellow Seeking Alpha author says No Isaacman, No Problem.

Marc Rowan - Apollo Global Management

Marc Rowan was a top contender for Treasury Secretary but didn't get the role. I think Apollo Global Management, Inc. (APO) is a very interesting business, and I plan to write about it in detail in the future. The stock outperformed the S&P 500 since October 8 by 21%.

Again, it's difficult to say why for sure, and financial markets certainly would view either Marc Rowan or Scott Bessent as a safe pair of hands at the Treasury. Probably, the announcement that Apollo would be joining the S&P 500 was also a key factor in the recent strong performance of the stock. Ultimately, Apollo Global Management, which is largely a fund manager of private equity and private credit funds, does well if the economy does well, which it has been doing. I expect the economy to continue to do well, but I don't think Scott Bessent or other Trump officials are going to necessarily benefit the private assets industry much more than that. In the alternative investment fund manager space, Apollo Global Management, KKR & Co. Inc. (KKR), and Blackstone Inc. (BX) are all well respected, but this doesn't mean we should automatically invest in them.

For those interested in the stock: Apollo's Investor Day back in October is worth watching to understand the company better. The Wall Street Journal has a good article recently about Rowan and Apollo titled Apollo CEO’s Flirtation With Politics Brings New Urgency to Succession Planning (see here).

Crypto bros - Coinbase Global and MicroStrategy

For some reason, Donald Trump is fascinated by Bitcoin. It doesn't make sense to me. This has been well publicized and therefore stocks like Coinbase Global, Inc. (COIN) and MicroStrategy Incorporated (MSTR) have done really well in the market. Since October 8th (my nominal start date when I think the market started to price in a Trump win), the above two stocks have beaten the S&P 500 by 65% points and 80% points respectively.

I have spent significant time trying to understand the utility of crypto, and I don't get it. While I think there is value in blockchain technology, crypto seems to me to be a Ponzi scheme and a mania. Manias are often followed by panics and crashes. So needless to say, I view both Coinbase Global and MicroStrategy as pure speculative vehicles and as such I have a neutral view of them.

Trump has appointed an artificial intelligence and crypto ‘czar’ in "PayPal Mafia" member David Sacks, formerly of PayPal Holdings, Inc. (PYPL). The "PayPal Mafia" nickname came from a Fortune magazine article on a group of early PayPal employees who went on to have influential technology careers. Musk and Thiel are also members of this group.

I would see the Sacks appointment as more positive, but only at the margin, for the leading hyperscalers: Amazon.com, Inc. (AMZN), Microsoft Corporation (MSFT), and Alphabet Inc. (GOOG) - but these companies are too large and global to be impacted by any one government appointment. In fact, they are likely to benefit more from the fact that Lina Khan will likely be leaving the Federal Trade Commission.

Conclusions

Most of the stocks that I can link to the Trump administration have already performed well in the last few weeks, beating the wider market by a fair distance, and so probably don't offer much opportunity from this connection alone. Indeed, some might see a correction as the Trump connection hype fades. However, Vivek Ramaswamy's Roivant Sciences and Chris Wright's Liberty Energy have not yet outperformed the broader market since it became apparent to the stock market that Trump would win the election. They are two interesting companies I believe could benefit under the new administration as their respective founders seek to implement new growth policies, and as such these two stocks go to the top of my buy watch list.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.