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David Kempton: 5 share tips for 'Trexit'

Experienced private investor David Kempton reveals three shares he bought after Donald Trump's election victory and two more on his radar.

 
David Kempton: 5 share tips for 'Trexit'

The investment scene shifted overnight as news of the US election result broke and stocks that previously appeared attractive are now sidelined for stocks which suddenly look more relevant in any portfolio.

Trump is for home spend, Fortress America, maintain and build the infrastructure, spend less on defence and policing the world.

So yesterday morning I bought Ashtead, CRH and Cadiz (see more below) and added to my stake in BlackRock World Mining (BRWM ), the best performing investment trust this year and it’s not over yet. All that copper, zinc and gold looks even more compelling today.

Last time I wrote here, I mentioned UK infrastructure stocks which have not done well, but I hung in there. It was the wrong country and a bit early, but their time will come too.

Pragmatic politician?

Trump has always struck me as a politician presenting a face to the electorate to seduce his chosen sectors of the community, especially the protest voter. Then, when elected, overnight he would become a much more serious politician: say a huge thanks to all his electoral staff and supporters, tell them they’ve done an ‘unbelievable job’ and ‘good bye!’

Then it’s hello to the full-time politicians, the Senate and the House, both Republican too, with ‘Guys, we have a big job to do’.

Sound familiar?  Boris Johnson swiftly, even gratefully, took on the mantle of foreign secretary and is now a staunch supporter of the Conservative party and no longer the renegade.

How the Establishment has been stirred up on both sides of the Atlantic. I was a committed ‘Remainer’, but got Brexit. The USA has now got Trump. We’ll take it on and get on with it – and so will the US.

Next month we have the referendum on constitutional reform in Italy and elections next year in Germany and France to look forward to. They could be fun with more upsets to come I suspect.

My Trexit tips

I have bought and sold Ashtead (AHT) before and bought again this morning and saw it rally 11.5%. With £2.5 billion of revenue, 86% of it from the US by renting construction and industrial equipment, the shares look good value priced at 12 times (P/E) earnings and a cheap price-to-earnings-to-growth (PEG) ratio of 0.6.

Debt is high, although long-term rentals mitigate this to some extent, and the 2% dividend yield is also a bit mean, covered four times by earnings, but put those aside as it sits in the sweet spot of the new Trump spend.

CRH (CRH), a leader in the global building industry and the largest materials company in North America with revenues of £24 billion, also did well gaining 6.7% yesterday. Before Trump’s win there were 14 brokers marking the stock as a ‘strong buy’. I would expect even more following from here now.

I considered buying Wolseley (WOS), up 5.7% yesterday. The UK distributor of plumbing and heating supplies has revenue of £11 billion, 66% in the US. On a P/E of 15 and PEG of 0.73 it looked good but I didn’t buy because you can’t buy everything!

I do hold Cadiz Inc (CDZI.O), a US land and water resource development company, listed on Nasdaq whose shares ran up over 13% after the result. I think it’s still a good speculative buy at this level. Cadiz owns a water project in the Mojave Desert, designed to capture billions of gallons of renewable underground water and deliver it to 400,000 homes in southern California. The project has passed environmental laws, but is held up in the House of Representatives contesting some historic rights of way.

Under the new regime, this project should now pass the Senate, then earn an estimated $145 million a year by 2019. Because of the political hurdles it only has an enterprise value of $225 million. Don’t bet the farm, but it’s a great punt now.

So on we go and enjoy the ride. Trump plans to cut corporation tax from 35% to 15% and incentivise companies with billions of dollars cash parked overseas to bring it home. These two factors alone should be good for US equities.

But there are big risks too in the wider world. Support for Nato and policing the world are not the priorities of the Trump government.

David Kempton is an experienced investor, proprietor of Kempton Holdings and a non-executive director of a number of quoted and private companies. He may have an interest in any of the investments which he writes about.

15 comments so far. Why not have your say?

William Phillips

Nov 10, 2016 at 20:21

When was Boris Johnson ever a 'renegade' in the Tories? He was one of their most popular figures. Even over Brexit he waited to the last minute before breaking with Cameron. As London mayor his only real idiosyncracy was opposing Heathrow expansion- a cause in which many Tories, including May and Hammond, joined him.

Anyway, Johnson is a lifetime career politician while Trump never ran for office in his life and did not start thinking seriously about it until he was in his late sixties. No comparison.

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DIY

Nov 11, 2016 at 09:11

DIY

Trump and BoJo are similar in that their own ego is their top priority.

Both are PR experts, milking the current fad for nationalistic populism.

Bo Jo has been quiet since he was rescued by Theresa May to be Foreign Secretary. But he won't be able to control his ego for much longer.

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Hotrod

Nov 11, 2016 at 16:50

Looking at the forthcoming Trump Presidency in an historical context one has to go back to the1930's Roosevelt era to find any kind of parallel. Although Roosevelt's "New Deal" policies were credited with lifting America out of depression, full employment did not return until the outbreak of WWII In fact high employment levels have, to a certain extent, only been maintained ever since because of the White House's preoccupation with foreign policy and its propensity to fight offensive, interventionist wars.

Donald Trump however wants to adopt a DEFENSIVE foreign policy and focus the economy on domestic issues.

But how will the numbers stack up? If he cuts defence spending it will mean an even greater loss of jobs, and how can he reinvigorate the manufacturing sector? The old technologies which made America great have long since been superseded by automated factories which require comparatively few workers. His idea of putting people to work improving the country's infrastructure is to be commended. Anyone who travels through the "rust belt" States, would be taken aback by the lack of investment and widespread dilapidation which exists, so few would argue that this was not worthwhile expenditure, but the problem remains that there would be no immediate pay-back, which leaves me sceptical that "The Donald's" high ideals and aspirations will be achieved in the relatively short period of one term in office.

One redeeming feature of his manifesto is his pledge to cut taxes. It seems like a "no brainer" to me. Their must be trillions of dollars stashed in offshore tax havens by the likes of Apple and Amazon just waiting for a window of opportunity to repatriate this vast wealth and put it to good use.

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Nick-

Nov 11, 2016 at 17:06

When Trump said about "draining the swamp" he was referring to established politicians in the saddle like Boris.

As William Phillips said above: "No comparison".

If Boris was an American, he would now be worried.

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William Phillips

Nov 11, 2016 at 17:16

Yes, the New Deal was a crock. America was sinking back into depression by the late 1930s. At least QE has staved off the day of reckoning longer.

FDR, following cousin Teddy, had long planned a showdown with Japan to obtain a 'new frontier' in the western Pacific and China. He was eventually able to provoke the Pearl Harbor attack through an economic blockade. In preparation he beefed up defense spending (America's standing army hitherto was a joke, smaller than Portugal's) and stimulated domestic activity.

The Donald wants to give the US a shot in the arm more by fixing the tatty texture of the country than by still more squandering on 'defense' against exaggerated bogeys such as Putin's Russia, 'Terror' or the Yellow Peril. Trump is a draft-dodger who probably thinks soldiers are suckers. He will not bow so readily to the military-industrial-surveillance complex which has leeched off the taxpayer ever since FDR threw it a lifeline in 1939.

Trump is a builder, largely within the States themselves. He is not a money manipulator like Mitt Romney, or a militarist like McCain, or a member of a pro political clan like the Bushes. A wholly new kind of GOP president: nobody knows how he will turn out.

All we can say for now is that in under 18 months he achieved, from scratch, the most stunning feat of inspiration and determination any presidential victor ever pulled off. Reagan in 1980, Truman in 1948 look like easy riders compared with Trump's run.

Pouring money into infrastructure while cutting taxes is a gamble indeed. but the establishment consensus has been refuted by events. Neoliberalism has run out of road. Printing money to prop up the 1% and their financial interests at the expense of the majority brought this election result. Fittingly, the Goldman Sachs gal was the one who got flattened.

Ignorant slogan-spouters often call Trump a 'fascist', but it is true in one sense. Mussolini, the inventor and sole practitioner of fascism, also emphasised stimulating consumption through vast public works. FDR's enforcer for the New Deal's projects on the same lines, General Hugh Johnson, revered the Duce and hung his portrait in his office. So apart from womanising and swaggering on balconies, Trump has something in common with the Italian who didn't really make the trains run on time, but who did build railways such as the Bologna-Firenze cutoff.

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Mark Stringer

Nov 12, 2016 at 07:19

I love the way that so much mud is slung by people in advance of someone actually doing anything.

I watched 3 minutes (all I can take of what passes for news on ITV and the rest) and some little shrivelled scotum was using the "live feed" from Washington to bitch about Trump saying the media manipulated "news" to show him in a bad light. They claim he used populist soundbites, so I wonder what the tripe that drips from their slack jawed mouths is then.

Well, Trump was simply expanding upon the shite that falls out of politicians mouths anyway only, he went further than most and with some honesty in part.

If every politician said what they felt it at least it would be less insulting to the morons who vote for the same dross decade after decade.

I also love the way that this US election and the EU vote has openly exposed the tossers who arrogantly feel that they are owed a living by someone, be it the credit addicted (mind you we are doing rather nicely with that American disease) US consumer or the wasteful (with our taxes) EU commissars (yes, I meant commissars and not commissioners). You only have to look at who wet themselves pre and post EU vote to discover how the "establishment" felt threatened and it speaks volumes as to who not to trust for those who actually are too stupid to not realise in the first place.

I wonder what there really ever is to comment on from what passes for news now as until Trump sets foot in the White House and clears out the trinkets that the anti Bush incumbent has potted around for 8 years to show his "right on" credentials to the bro's and sweeps away the unaffordable Obama care fiasco (not that it ever really actually was implemented) what is there of note, only tittle tattle.

As for the comments about womanising and the comparisons with Berlusconi, gawd, take a serious look at egos and arseholes here and then if you can find enough paper in the world, list all of our "shaggers" of all persuasions in HoC and HoL then expand it world wide.

The political corruption is ingrained around the world with the voter the last in line so Trump has some hurdle to jump.

But it is telling how the average prole would rather, like a junkie, get their credit fix and be mugged off by a shiny corporate logo like Goldmand Sachs, Amazon, Apple.......the politicians who have helped heap misery upon misery than have some slight chance at putting their own productive people first and reclaiming some self respect.

I hope that the US actually does mind its own business as far as conflicts go and perhaps we will do the same if we are not prodded like some party chimp to perform for the US music.Does any sane person really imagine outside of some media comic book and the weekly self interest prattle of the senior mod mouth pieces and former this and that's in the military that Putin is going to be pitching up in Dover. He'd be way the line after the Poles, Czechs, Romanians, Africans, Syrians, Afghans........

Wannabee worried, roll forward by 50 years and imagine your grandkids with pudding basin haircuts, eating bowls of rice or starch with their hands because all the trees are gone and chopsticks can't be made, insects, anything that moves with a heartbeat, fighting for fresh water, energy, housing, drugs to combat the disease that 20 billion people have spread, then see how insane Trumps ideas are about containing uncontrolled immigration. because it doesn't raise living standards as even the most dense (apart from Tim Fallon it seems) must now know.

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DIY

Nov 12, 2016 at 09:22

DIY

Phew!

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Hotrod

Nov 12, 2016 at 11:21

@ Mark Stringer

Sounds like you hold court in Donald Trump's locker room!

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JonS

Nov 12, 2016 at 13:51

I think most of the Trump rhetoric was simply to get the deal done. I believe he has no real conviction in any of the areas that were popular with the electorate (immigration, healthcare, abortion) and he will quickly abandon these in favour of what he does, which is borrowing money, building stuff, putting his name on it, making money and moving on. In four years time ther will be loads of Trump bridges, schools, highways etc and a huge pile of debt and Donald will be having his ghostwritten autobiography penned while he moves on to the next deal.

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Dorothy Bell

Nov 12, 2016 at 21:01

Give Trump support, he is fresh and fairly elected. He will be a great leader and will know that no man can please all of the people all of the time. Support him.

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Mark Stringer

Nov 13, 2016 at 12:05

Hotrod and your brilliant idea is to..........no, thought not! You must like what we have become or profited from it. Not one of those "owed a living jockeys are we"?

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Mark Stringer

Nov 13, 2016 at 12:13

Dorothy Bell, sadly, we have so many "my rights" and "I don't like it so i'm going to twitter, facebook, WhatsApp it away" wallies.

We have bred a generation of whoopsy's, whose worried well parents have developed the army of frail, allergic to this and that's and as they haven't ever had to live in the real world yet live with mum and dad into their 40's live this imaginary world where everyone is equal and homogenised in a multicultural melting pot.

If or when they ever get round to paying taxes, for all the lovely services that are provided to them by real taxpayers then the reality will bite.

Trump is a welcome change and even if he only does 20% of what he said will be a good start. Yes, give him a chance.

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William Phillips

Nov 14, 2016 at 14:43

Trump is as much a symptom as a determinant of change. Farage, Le Pen, Alternativ fur Deutschland, Viktor Orban... and on the other side, the eclipse of traditional social democratic parties in Europe which have played along with banksters, neoliberalism and globalisation, offering to mitigate their predations but never seriously tackling the looters and cheats.

Now even in un-ideological America, the GOP grassroots have rejected Big Business-pandering and neocon foreign policy from its weakling 'cuck' leadership, while the Dems may continue down the Bernie Sanders path away from Goldman Sachs Hillary.

The revolt is nothing new. It began with the Tea Party. Ross Perot and Pat Buchanan prefigured it. Now the 'progressives' are catching up with the Republicans.

The 1% got out of the global financial crisis too unscathed to satisfy the majority. Their arrogance since then has rubbed salt in the wounds.

The rage and disappointment of clueless liberal Social Justice Warriors against Trump and his supporters is only a personalised projection and denial of an uneasy awareness that the game is no longer being played by their rules, and those of the international cabals whose unwitting tools they are. Trying to win over white electors by telling them how stupid, wicked and ignorant they are doesn't seem to go down too well. Even the 'it's time for a woman president' pitch flopped.

Hillary's 'deplorables' rant only made too many of the natural Dem supporters- who have been ignored while racial and sexual minorities were wooed- say 'hey, she's talking about us!'. Result: they switched to Trump or stayed home. Some might have voted for Bernie, because he was more likely to give the working stiff a fair shake. Apparently Bill warned Hillary she was taking these guys for granted.

The swing to Trump in states impoverished by the banksters' rule and 'free trade', such as Pennsylvania and South Carolina, says it all. The Rust Belt ran away from liberal economics. The electoral college map shows Democrat victories on the west coast, thanks to the Latinos of California, and on the NE coast thanks to guilty-white-liberal and self-interested bureaucrat concentrations of voters around Washington and New York. But pretty much everywhere else- 'Flyover Country' as the sneer goes- preferred the Donald. Not with wild enthusiasm (turnout is down) but by enough. Even blacks and Latinos liked his message a little more than they had liked Mitt Romney or John McCain. Trump talked to Americans as one bunch of exploited and neglected citizens who deserved a better chance to suceed by their own efforts, not as victims whom only Mama State could rescue.

This decision, in the face of the mainstream media's unprecedented and shameless bias to Clinton and considering how many top Republicans disowned him, is truly insurrectionary. Never has a major party's aspirant to the White House overcome such obstacles.

Middle America has given up on the bromides of free trade: the drugs don't work for them and theirs, only for the smug 1%. And the echoes are all over modern societies' political turmoil. Whatever befalls the Trump presidency, this is a worldwide movement which is not easily to be turned back. If Trump falters or proves to be a sellout or phoney promiser, do we really think the electors will shrug ruefully and return to backing the likes of Crooked Hillary? Some reactions, as in chemistry, are irreversible.

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Hotrod

Nov 14, 2016 at 18:50

@William Phillips

Your comment is very helpful in explaining the surge in political discontent which has swept across the USA and may stimulate a wave of opposition across Europe.

The political climate has indeed changed, but the proof of the pudding may take many months if not years to materialise. It must be remembered that whatever Donald Trump says he is going to do, legislation has to be drafted, debated by Congress, and then passed by the House of Representatives and the Senate. His proposals are so controversial that I cannot see them making the statute book without some amendments.

D.T.says his first task will be to deport between 2 and 3 million illegal immigrants with criminal records or incarcerate them. Is this a realistic objective without first dramatically expanding the department of homeland security and building new jails?

He wants to make a start on the border wall between Mexico and the Southern States. Perhaps he will take advice from Israel, they have plenty of expertise but the logistics of covering a thousand miles of territory looks prohibitively expensive to me.

He wants to introduce trade tariffs. Yes, some tariffs would appear to be necessary to prevent China dumping steel exports at below cost etc., but how would tariffs on consumer goods help? It would simply increase the cost of living for those who can least afford to pay.

He wants to cut taxes. Yes,that would stimulate spending, but the fact is, it's the 1% who would be likely to benefit most, also US Treasury and the Federal Reserve would have something to say, bearing in mind that the US Debt/GDP ratio is currently approx' 110%. How much more debt can the economy stand?

Never-the-less I am optimistic. Donald Trump has shown extraordinary entrepreneurial skills in building his business empire, let's hope he can do it for his country to.

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William Phillips

Nov 15, 2016 at 13:59

Trump starts with some unusual advantages. He has shrewd operators on his team: Pence Giuliani, Sessions. He is a practised dealmaker, with the prestige of a victor who overcame extraordinary odds. He has no need of being bribed and owes the Washington political elite zero favours.

Plus, he did get the grassroots of the GOP behind him. Nine out of ten registered Republicans ended by voting for him, whatever their reservations about his personality. And in the true 'national popular vote', for the House, the GOP is winding up 4m ahead of the Democrats. From the Far West to the eastern Rust Belt and the South, and patchily in New England, America turned red.

The Republicans now control both houses of Congress and two out of three state houses- on Trump's coattails. They can reorient the Supreme Court. This puts tremendous heft behind sweeping change.

If the appeasing professional political caste in Washington, the Paul Ryans and Mitch McConnells who dance to the donor class's tune, try to blunt the force of Trump's programme, his grassroots will continue to push back against their appeasing of banks and big business. The cuckservatives risk being deselected from their berths inside the Beltway, the way Dave Brat saw off House leader Eric Cantor in 2014.

Nothing succeeds like success, and I suspect the elite is too fond of its privileges and pay to risk defying the will of the people. That encompasses in some aspects not only Trump voters but Sandersistas.

A large majority of ordinary Joes now accept the shared diagnosis of the insurgent candidates: neolib business as usual is finished, bipartisan fixing behind a facade of party disagreement us fatally discredited. The Bernie backers can certainly go along with investment and job creation to help blue collar workers, the centrepiece theme of the 45th POTUS.

So whether Trump steers America on to a better path for the 99% or not, they won't go back to the failed superstitions of 'free trade' and America as Globocop-cum-preacher which has left the citizenry feeling utter contempt for old-guard leadership.

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