Opinion |

Some Alternative Facts for Your Trump-era Stocks Portfolio

Israeli shares haven’t exactly boomed since Election Day, but they should have, since paranoia and defense spending are on the rise, and Lethal Toys R Us. So what’s an investor to do?

David Rosenberg
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A visitor tries on an Aviation Night Vision Imaging System at the Elbit Systems booth at the Singapore Airshow, February 14, 2012.
A visitor tries on an Aviation Night Vision Imaging System at the Elbit Systems booth at the Singapore Airshow, February 14, 2012.Credit: Tim Chong, Reuters
David Rosenberg

In the brave new world of alternative facts, it seems that Wall Street has a few of its own: While everyone else from Beijing to Brussels see nothing but doom and gloom ahead with Donald Trump, the U.S. stock market has been setting new records.

Given the chaos in the White House, and serious questions about Trump’s abilities at the personal level to run the United States, you would think the market would take a wait-and-see attitude before placing its bets. But the conventional wisdom clings stubbornly to the idea that the new administration will deliver on business-friendly policies like lower taxes and deregulation.

A minor constellation in this alterative facts universe is Israel.

Who you gonna call for a wall?

If Trump is going to step up defense spending and erect a wall along the border with Mexico, Israeli companies should be big winners. After all, Lethal Toys R Us, and if you need a wall who you gonna call? We’re surrounded by them.

The problem is that anyone who bought Israel the morning after Election Day would have (relatively speaking) regretted it. The Tel Aviv Stock Exchange’s TA-25 index rose only 4% while the MSCI World index for developed countries has done double that. The Nasdaq Composite Index is up 13% to record heights.

Well, if the rally hasn’t come and it should, so here are some investment ideas, all of which I already deny ever having actually made:

Magal (up 57% since Election Day): This is the biggie. Every time Trump mentions a wall, Magal shares take off amid a small flurry of media hype. The assumption is that its experience in building high-tech fences with sensors and robot guards will automatically entitle it to a contract to help build the Trump barrier. The problem is, with a market cap of just $150 million, it will be hard for too many investors to buy a piece of Magal’s action. In any case, if Mexico is going to pay for it, the wise investor will hedge on the peso.

Elbit Systems (up 22% since Election Day): Fat U.S. defense contracts may be on the way, but there’s only one Israeli defense contractor that stock market investors can buy into, because the other big ones are government-owned. In fact, Elbit could do well by The Donald because it’s the only Israeli arms maker with extensive U.S. operations, which will give it easier access to Pentagon contracts. Also the Trump plan calls for expanding the number of U.S. fighter jets, all of which will need the special gear Elbit makes. The only thing to watch out for is Trump calling out Elbit for price-gouging on its high-tech helmets.

The Brainsway helmet: American investors may yet find a keen need for this technology.Credit: Courtesy

Check Point (up 21% since Election Day), Verint (down 4%) and CyberArk (up 6.2%): Having invited the Russians to hack the Democrats’ computers, Trump may now feel that it would be appropriately presidential to dial back a bit and start discouraging foreign countries from spying on America. The Trump defense plan calls for stepped-up cyber-security spending and, in an era of justifiable paranoia, the private sector has been shelling out more than ever on cyber-security. International Data Corporation forecasts spending on cybersecurity to grow 38% between now and 2020 to $101.6 billion -- and that forecast was made before Trump was elected.

Ability (down 1.7% since Election Day): This may be the perfect stock for the Trump era. First, Ability helps governments spy on people, a perfect complement to the portfolio of cyber-security stocks mentioned above. If both sides of the business do their job right, it would be a win-win for everyone involved. Second, the company is being questioned by the U.S. Securities and Exchange Commission about a 2015 merger it conducted with a shell company and its subsequent financial reporting. In the not-too distant past, that might be considered a negative, but in the Trump era, the savvy investor can ignore it as FAKE NEWS by a bunch of loser journalists and regulators.

Brainsway (up 17.7% since Election Day): This company has been shockingly ignored by the bulls even though it is tailor-made for the Trump era. In Brainsway’s own words, the company is “dedicated to developing and providing advanced technology solutions for the treatment of a variety of brain disorders.” So, you’re thinking that gets it just one sale, albeit a high-profile one, so what? In fact, Brainsway’s Deep TMS helmet is not for that kind of disorder. However, it is medically approved for treating major depressive disorder, and over the next four years (dare we say eight?) there will be a lot of that, especially in major markets like blue states and the clinically sane.

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