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The market has had a blistering run since Nov. 8 – with the Dow Jones Industrial Average up 9% – but plenty of the "experts" on Wall Street are pessimistic about Donald Trump's effect on tech stocks.
These folks believe that Trump's tough trade stance will hurt tech because the big global players manufacture many of their products overseas.
"I would avoid [big tech stocks] in a big way," DoubleLine Capital CEO Jeffrey Gundlach said a week after the election. "The basic fundamental underpinnings of [big tech stocks] disappeared one week ago today."
Gundlach may be the "Bond King" – but he's wrong here about tech stocks.
In fact, they're all wrong.
Trump is going to be great for tech investors.
Listen closely, because I'm about to tell you the three things Trump is going to do to make that so.
Then listen closer, because I'll show you three market-beating plays that you can "Buy" today in order to make outrageous profits off of the president-elect's actions.
Let's get to it…
Pro-Growth Prez Means Rich Tech Investors
Before we get to Trump's plans, though, remember… we entered the "Singularity Era" back on Aug. 1.
Here's what that means.
In today's global market – where competitive pressures are forcing corporations to relentlessly pursue every efficiency and advantage possible – every company is a tech company.
And that makes this the greatest money-making opportunity we'll see in our lifetimes.
Now, back to "The Donald"…
As I like to remind investors, to make money in the wealth machine that defines high tech, you have to follow Rule No. 2 and "Separate the Signals from the Noise."
You have to get beyond Wall Street's hype – whether it's the mania you see on cable TV or the pessimism you get from the likes of Gundlach – and focus on the fundamentals.
Fact is, Trump is a pro-growth president, and that alone will be huge for the economy, the overall stock market – and tech firms. He's made 4% GDP growth one of his top goals. If he's able to hit that number, the economy would expand 66% faster than it has for at least the last eight years.
That may sound unrealistic – but here's how he could get there…
- Just look at Trump's Cabinet We're going to see more business-facing red tape cut at the Food and Drug Administration, the Environmental Protection Agency, and elsewhere in the next few months than we've seen in years. Part of his 100-day action plan is a "requirement that for every new federal regulation, two existing regulations must be eliminated."
- Trump has plans to bring some $2.4 trillion held offshore by U.S. firms back home. That alone will be huge for high tech. He proposes a onetime "repatriation rate" of just 10%. Because tech firms as a group account for roughly 35% of those overseas funds, Silicon Valley will soon be flush with extra cash… to the tune of $756 billion.
- The president-elect wants to lower corporate income taxes from 35% to 15%. This will spur firms to hire more workers, invest in R&D, and buy such tech products as cloud software and mobile productivity services that add to profit margins.
And I'm not the only one bullish about the U.S. economy starting in 2017. According to a recent report from the respected Organization for Economic Cooperation and Development (OECD), Trump's spending plans and tax cuts are expected to help double our recent economic growth rate by 2018.
You can see that the next 12 months promise to be a profitable year for tech investors. With that in mind, I've dug up three great ways – three true "gems" – you can use to cash in on the broad growth I see ahead.
So let's take a look at these 2017 Tech Wealth Gems…
2017 Tech Wealth Gems No. 1: IGM
The iShares North American Tech ETF (NYSE Arca: IGM) covers many of the big leaders in tech. Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), Amazon.com Inc. (Nasdaq: AMZN), and Facebook Inc. (Nasdaq: FB) anchor this fund, making up 30% of its portfolio.
These firms have used their size to outgun smaller rivals, and each has spread its swings into the fastest growth areas of tech. While many of the firms in this iShares fund have done a great job reaching into global markets, they all count on North America as their major source of strength.
You can't blame them. Since the 1960s, Silicon Valley and other U.S. tech hot spots have ushered in wave upon wave of tech breakthroughs, from chips to the smartphone to cloud computing. It's also one the main reasons why the United States boasts the world's largest economy.
IGM has a great track record. It rose 16.6% in 2016, and over the past five years, it has clocked 17.4% yearly gains. IGM trades at roughly $126, with a 0.48% expense ratio.
2017 Tech Wealth Gem No. 2: IWM
While it's imperative to have a lineup of winning tech giants, I believe it will really pay off in 2017 to also focus on small- and mid-cap tech firms.
That's because the situation with our trade agreements under Trump are somewhat up in the air. By and large, smaller firms focus their operations and sales here in North America, which means they are less exposed to changes in the U.S. dollar.
The best proxy for small caps remains the iShares Russell 2000 ETF (NYSE Arca: IWM), which seeks to reflect the Russell 2000 index of small-cap firms. While not a "pure" tech play, IWM is a solid "twofer" – tech and healthcare make up 28% of the portfolio, and high tech factors heavily in the consumer stocks in this ETF.
IWM is already in a strong uptrend. In the fourth quarter, the Russell 2000 gained 9%, more than double the S&P 500. IWM trades at roughly $136, with a 0.2% fee for expenses.
2017 Tech Wealth Gem No. 3: SKYY
While it's important to have broad-based exposure to tech firms both large and small, you also need to zero in on some the industry's hottest trends – like cloud computing.
Firms are seeing the value of migrating their key data and services away from local servers and on to the internet backbone. By doing so, firms reduce manpower, save money, and improve service by giving both staff and clients access to key programs and files.
According to Statista.com, cloud computing has grown at a 16% yearly clip in the past five years. And Gartner Group says that $111 billion in tech spending was earmarked for the cloud in 2016 – a number that will hit $216 billion by 2020.
So, the First Trust Cloud Computing ETF (Nasdaq: SKYY) is clearly after a massive market. This fund focuses on firms that are providing cloud-focused hardware and software, like Amazon and NetApp Inc. (Nasdaq: NTAP). But it includes firms that use the cloud to deliver services, like Netflix Inc. (Nasdaq: NFLX).
Trading at just $35.50, SKYY has a 0.6% expense ratio. Last year, the fund gained nearly 20% and has averaged profits of 15.4% over the past five years.
Covering All Bases
With these three funds, you don't need to choose a favorite. Each one captures a crucial corner of the tech market, from the biggest players to the smallest – to one of the most dynamic growth sectors in tech.
All three of these funds crushed the market last year and should do so again in 2017 – thanks to Trump's renewed focus on growth.
Owning these "Singularity Era" funds is a great way to start your 2017 tech investing action plan with three foundational plays you can hold for years.
Of course, Trump's growth plan can't save every flailing tech company out there – and knowing which investments not to make is an equally important part of laying out your yearly plan.
And so next week I'll share with you the stocks that I think will end up as 2017's biggest "tech turkeys."
You'll want to check out that report – but avoid these stocks.
See you then.
- Strategic Tech Investor Special Report: On August 1, the Stock Market Achieved Singularity…
- Strategic Tech Investor: When It Comes to ETFs, Keep Your Eye on These Three Metrics
- Strategic Tech Investor: This New Year's, Get Aboard the Wealth Rocket
- Strategic Tech Investor: The 3 "Singularity Era Tools" You Need in 2017
The post "Despite What This 'King' Says, Trump's Plan Will Inflate These Tech Plays" appeared first on Strategic Tech Investor | Michael A. Robinson.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.