ANNE ASHWORTH helps investors find find US stocks

The world’s attention turns next week to America and the inauguration of Donald Trump as 47th president.

But once the pomp and circumstance of the ceremony are over, thoughts will shift to the outlook for the economy – and the impact on share prices of Trump’s deregulation, tariff and other policies.

Despite the stellar stock market gains of 2024, an era of American exceptionalism seems to be only just beginning, which means that ignoring the US could be costly.

The Wall Street giant Goldman Sachs acknowledges that US shares are expensive, but is telling its clients that this is not a reason to ignore the opportunities.

Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund sums up the case: ‘The US offers the world’s best entrepreneurship, innovation, education, management, capital market dynamics – and first world demographics.’

Confidence in the prospects for the US economy under the Trump administration are high. Bank of America analysts expect growth and corporate profits to outpace those of other developed countries. The S&P index of leading American companies may have risen by 23 per cent over the past 12 months to 5,816, but it is forecast to end the year still higher at 6,666.

You may already own a slice of the Magnificent Seven of tech – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla –which are benefiting from the generative artificial intelligence (AI) industrial revolution.

But other tech companies are stepping into the spotlight and businesses in other sectors from banking to healthcare are worth considering.

Among the shares that could prosper are Wall Street banking giants, fast-food restaurants and the companies that raise the spirits of Americans.

Take, for example, TKO Holdings, the conglomerate that owns WWE – Worldwide Wrestling Entertainment. Trump admires the showmanship of wrestling. He is also seeking to appoint Linda McMahon, WWE’s former boss, as his education secretary.

These are the sectors that are forecast to continue to shine, or to step into the limelight as Trump takes his seat in the Oval Office.

TECH

The emphasis on the Magnificent Seven will remain. Smit cites Amazon as one of the key holdings at his fund. Giles Parkinson, head of equities at Close Brothers Asset Management, points out that Microsoft, although a member of the Magnificent Seven, has been held back by fears that it is splashing out too much cash on AI and cloud computing.

However, Parkinson argues: ‘Even cautious investors should back Microsoft to be at the forefront of the coming doubling of all technology spending as a proportion of GDP over the next decade.’

The Magnificent Seven will continue to be much talked-about.

But you can expect to hear more about US companies that are taking advantage of every aspect of the digital innovation.

Smit favours Eaton, the electronic components and power systems group.

Kirsty Desson, co-manager of the Abrdn Global Smaller Companies, likes Vertex, which specialises in tax compliance softwares. Its services should be sought after as companies adjust to the Trump administration’s tax reforms and to proposed tariffs on imports.

Bank of America’s list of best buys includes Samsara, a digital fleet management firm, and TaskUs, a digital outsourcing business.

BANKS

America’s banks have unveiled bumper results in past days. But they could prosper further under the Trump regime, given that their capital requirements are likely to be loosened. This will allow them to lend out a great deal more money, or enable them to buy back their shares, a manoeuvre that should bolster their share prices.

Among the beneficiaries of such deregulation would be the leviathans like Bank of America – which is regarded as a ‘fortress’ by its fans – JP Morgan and Citigroup. This month analysts have raised their target price for Citigroup’s shares to $96. They stand at $74. Desson says that Wintrust Financial Corp is a high-quality, regional bank in the US which should benefit from increased demand from individual customers and businesses.

East West Bancorp is on Bank of America’s own list of best-buy stocks, although its shares are already up by 40 per cent over the past 12 months. Also on this list is Block, the payments company that used to be called Square.

The business was founded by Jack Dorsey who also set up Twitter, now known as X.

ENERGY AND CONSTRUCTION

The view that Trump’s exhortation to ‘drill, baby, drill’ will be followed ought to be good news for the Big Oil players ConocoPhillips and Exxon.

But there could also be a boost for lesser-known corporations such as Nucor, which makes the steel for energy industry installations, and Peabody Energy, which provides the coal for this kind of steel-making.

Bettina Edmondston, manager of the Saracen Global Income and Growth fund, says the US electricity grid is struggling to cope with the demands posed by AI, climate change and other forces.

The need to upgrade the system should provide work for the power generator giant Caterpillar.

Avient, which makes speciality composites, is well positioned to replace America’s deteriorating power poles.

Parkinson highlights CRH, the world’s number one building materials supply company.

The group, which moved its listing from London to Wall Street in 2024, is ideally placed to provide the wherewithal for Trump administration infrastructure projects and regeneration.

Parkinson says: ‘The stock does not yet feature in popular stock market indices like the S&P or Russell 2000. This makes it an attractive proposition for more adventurous investors.’

CONSUMER STOCKS

The share price of CostCo, the discount warehouse group, jumped by 39 per cent in 2024. But the shares are still rated a ‘buy’, although they are rated at 50 times  earnings, making them more expensive on this basis than Nvidia, the semiconductor giant.

The $407billion retailer’s profits are fuelled by membership fees which foster customer loyalty. A Netflix-like clampdown on membership sharing should ensure these revenues continue to flow.

Walmart – whose market capitalisation has reached $709billion, thanks to a 72 per cent bounce in its share price in 2024 – is the world’s biggest retailer.

But this behemoth is still considered a ‘buy’ because of its ability to compete with Amazon. Its ability to appeal to a younger clientele is also a factor.

Earlier this month Walmart produced the ‘Wirkin’, a dupe of the £7,000 Hermes Birkin bag for $78. Tik Tok and Instagram influencers were shown buying this copycat accessory while shopping at the supermarket.

Desson’s pick is elf Beauty – the mass market cosmetics and skincare brand that has a huge following among younger consumers, thanks to its focus on vegan and cruelty-free products, its product innovation and its social media presence.

Although elf has continued to deliver stellar growth, this has not been reflected in the share price, partly thanks to concern over the impact of import tariffs.

But it is likely that these will be introduced more gradually.

FUNDS

Winterflood Securities’ picks are Scottish Mortgage, the controversial FTSE 100 tech investment trust whose largest holding is Space X, the $350billion designer and maker of rockets, where Elon Musk is chief technology officer and chief executive. The portfolio also includes Amazon, Meta and Nvidia.

Pershing Square Holdings, another FTSE 100 member, is another Winterflood tip.

This trust owns Alphabet, the owner of Google, but also the fast-food chain Chipotle and Fannie Mae and Freddie Mac, the businesses that back most of the mortgages advanced to American homebuyers.

Pershing’s manager is Bill Ackman, a vocal supporter of Trump, who shares his fluently argued views on US and UK politics with his 1.6m followers on X.

These two trusts are the core of my bet on America, but US corporations make up the major part of many popular funds.

For example, Alliance Witan may sound solidly Anglo-Saxon but Amazon, pharmaceutical giant Eli Lilly, Microsoft and Nvidia figure in its top 10 holdings.

If you would prefer the simplicity of an index fund, Vanguard US Equity index is Interactive Investor’s recommendation.

Whatever your choice, it is worth remembering that the US markets are an expensive proposition at present.

But you can lessen your risk of a sharp reverse by making monthly contributions to a fund or trust, rather than committing a lump sum.

Think of it as crossing your fingers while saying: ‘God Bless America.’

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