It’s no coincidence that President Donald Trump’s first foreign visit — to Saudi Arabia — comes amid the announcement of a slew of business deals between the Saudis and U.S. companies.
More than $300 billion are in play, and that’s good for a beleaguered presidential administration that could use some positive news.
“I can’t imagine another business day that’s been as good for the United States and for the kingdom,” Commerce Secretary Wilbur Ross said at a meeting in the Saudi capital on May 20.
Of course, U.S. companies, and potentially stock market investors, should capitalize on the Saudi deals, too.
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“Several companies and sectors will benefit from the deals that Trump has made with the Saudis,” says Andrew Denney, founder and chief executive officer of Prosperity Financial Group in Springfield, Missouri. “The deals seem like they’re following the Trump agenda — defense, energy, and infrastructure. Trump cites himself as a dealmaker, and a $300 billion deal isn’t bad.”
Kajal Lahiri, professor of economics at University at Albany in New York, says aerospace, defense, oil, gas and manufacturing companies should get a boost from the announced deals. “Stocks, earnings, and employment in these sectors are sure to get a boost, even though the stocks of the companies might have already incorporated the current expectations of future profitability,” Lahiri says.
While each of these companies are expected to benefit from Saudi investment and contracts, investors are warned not to make short-term moves in their portfolio simply to try to capitalize on the news of the day. Instead, a long-term approach to investing is more beneficial. Investors should take a stake in the companies if they believe they are good companies with a long-term path to success.
“In the long run, and I believe it is wise for investors to focus on the long run, the impact of Trump’s trip to the Middle East and Europe is negligible,” says Robert R. Johnson, president and CEO of The American College of Financial Services, in Bryn Mawr, Pennsylvania. “The 24/7 financial news networks are rife with advice on portfolio changes as a result of the latest news. The belief that one needs to change his or her investment strategy as a result of any of these seemingly fleeting forces is, in my opinion, fallacious.”
Here’s a snapshot of the “winners” coming out of Trump’s trip abroad.
Boeing Co. (ticker: BA). When you talk about the Trump trip, you have to talk about the defense industry, Denney says. “The Saudis signed a $110 billion agreement for defense spending. This will directly benefit the whole sector, but especially for companies like Boeing.” The defense industry giant should cash in on three areas of the Saudi deal.
— The company announced agreements from the Saudis to buy Chinook helicopters and associated support services, as well as guided weapon systems.
— Saudi Arabia will purchase P-8 maritime, patrol and reconnaissance aircraft, which are based on the Boeing 737 commercial airplane.
— An agreement was also inked with the Saudi government to provide sustainment services for a wide range of military platforms.
Dennis Muilenburg, Boeing’s CEO, has met with Trump three times since the November election. He recently told industry analysts that Boeing now has a “voice at the table” at the White House. BA stock rose from $176 to $185 in the five days following the Saudi deal announcement.
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Blackstone Group (BX). The U.S. infrastructure sector “wins big, too,” Denney says. Start with Blackstone, which announced a $20 billion deal with the Saudis to build and develop infrastructure here in the U.S. The $20 billion is only a sweetener — both parties expect the Saudis, via the kingdom’s public investment fund, to raise at least another $20 billion, Blackstone officials say in a May 20 news release. Stephen Schwarzman, Blackstone’s CEO, runs Trump’s business council and is considered a trusted White House advisor. BX stock rose from $29 to $32.50 in the five days following the Saudi deal announcement.
Lockheed Martin Corp. (LMT). Lockheed reportedly has signed deals totaling close to $30 billion with the Saudis, thanks in part, by Lockheed’s close relationship with the Trump White House. “Part of these defense industry deals, in my opinion, are political in nature,” says Gary Tsarsis, a business professor at the University of Pittsburgh. “The president is keen to see the Saudis take on a more active role in the fight against ISIS, and these deals may possibly assist in that objective.”
That’s no hyperbole, especially in the Lockheed Martin deal. Trump’s son-in-law and senior advisor, Jared Kushner, personally contacted Lockheed CEO Marillyn Hewson to seek her help getting a price break on a high-cost missile detection system, several administration officials told the New York Times. LMT stock rose from $266 to $284 in the five days following the Saudi deal announcement.
Exxon Mobil Corp. (XOM). Exxon Mobil signed a deal with Saudi Arabia to build a $20 billion petrochemical complex on the U.S. Gulf Coast, with help from the Saudi Basic Industries. The deal provides a big boost to Exxon’s “Growing the Gulf” initiative, which aims to create between 35,000 and 47,000 jobs. According to Exxon, the Gulf program is comprised of 11 high-level chemical, refining, lubricant and liquefied natural gas projects. Rex Tillerson, the former CEO of Exxon, is Trump’s secretary of state. XOM stock rose from $81 to $83 in the five days following the Saudi deal announcement.
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General Electric Co. (GE). On May 20, General Electric announced a new $15 billion deal with Saudi Arabia, that, among other things, provides power generation services and consulting, digital technology provided to Saudi Aramco, and a separate deal that has GE building gas turbines in Saudi Arabia. CEO Jeffrey Immelt has had a contentious relationship at times with Trump, publicly disagreeing with the administration’s policies on immigration and climate change, but GE is a big backer of Trump’s tax package. GE’s stock has maintained its $27-per-share price level in the five days following the Saudi deal announcement.
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5 Stocks That Should Benefit From Trump’s Big Saudi Deals originally appeared on usnews.com
