The US market has powered higher since Donald Trump’s election back in November. He has promised a new American “golden age” centred around tax cuts, deregulation, and economic growth. The good news for UK investors is that some London-listed stocks are set to benefit, including in the FTSE 250.
Here are two that could march higher while Trump is in the White House and that I think are worth considering.
4imprint
The first stock is 4imprint Group (LSE: FOUR). This £1.5bn company sells custom-branded promotional products to help customers enhance brand visibility. These items include personalised merchandise like clothing, stationery, mugs, and more.
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Lower corporate taxes are likely to benefit small and medium-sized businesses in America, where 4imprint generates 97% of its sales. Its customers range from Fortune 500 companies to small charities and family businesses. Many will probably now feel confident to invest more heavily in brand promotion, benefiting market leader 4imprint in the process.
Yesterday (21 January), the company reported a solid trading update for the year ending 28 December. Revenue is expected to have increased 3% to $1.37bn, while pre-tax profit is anticipated to be no less than $153m (at least 8.5% higher and at the upper end of analysts’ forecasts).
Such growth might not seem particularly impressive, but it’s important to remember that the firm has been operating in challenging market conditions. Inflation and interest rates have been high. While there’s definitely a risk such weakness could persist, there’s also a chance that 4imprint’s growth will accelerate if the US economy starts growing strongly.
An attractive thing here is the company’s capital-light model. Most orders are drop-shipped directly from its suppliers to customers, which minimises the need for inventory. Indeed, 4imprint’s return on invested capital (ROIC) is above 80%, which is incredibly high.
Also, the North American promotional products market is estimated to be worth around $26bn, but the company only commands just over 5% of it. So there is the potential for further market gains given the highly fragmented nature of the industry.
Finally, the stock is trading at 14.6 times next year’s forecast earnings while offering a forward dividend yield of 4%. That looks good value to me.
Betting on US growth
The second stock that looks well placed to benefit from a Trump administration is Baillie Gifford USA Growth Trust (LSE: USA). As the name suggests, this trust invests in growth businesses found across the pond, including unlisted ones.
Trump has promised to deregulate industries to unlock innovation and growth. This should ultimately benefit many of the portfolio’s top holdings, including Tesla (robotaxis), Nvidia (artificial intelligence), and SpaceX (rocket launches). Other innovators include Amazon and Shopify.
One thing worth highlighting here is that US activist hedge fund Saba Capital has taken a large stake and wants to overhaul the trust’s board. There’s a shareholder vote on it next month. Baillie Gifford says Saba’s proposals would be “value-destructive“.
The hedge fund has criticised the trust’s poor performance. However, for the six-month period that ended 30 November, the net asset value return was 29.4%, compared to a total return of 15.3% for the S&P 500 (in sterling terms). So the criticism seems exaggerated to me.
Looking ahead, I think the portfolio of high-quality growth stocks is set up for strong gains and is worth considering.
