Fundstrat's Tom Lee told clients to buy undervalued companies that will do well under President Donald Trump's policy agenda.
"Since election day, one of the more obvious (and appropriate) shifts in investor frameworks is the shift from the Fed put ... to the policy put (Trump is pro-growth). And with this shift, sector and style implications are notably different — favoring groups levered to higher nominal GDP, higher inflation and de-regulation," the strategist wrote in a note to clients Friday.
"As we discussed in our 2017 outlook, we see this favoring CRAP [computers, resources, American banks, phone carriers] as well as value stocks."
The strategist said value firms will benefit greatly from Trump's policies of corporate tax reform and fiscal stimulus. Lee cited how the value strategy's under performance versus growth companies hit a 20-year high in 2015 and then reversed last year. In 2016, value's return beat the S&P 500 by 4.3 percentage points. He noted how these cycles historically tend to mean revert and last seven to eight years.
To take advantage of the call, Fundstrat screened the S&P 500 Value index for stocks with below industry-average valuations and within the firm's preferred 'CRAP' sectors. Here are six value stocks it highlighted, which made the recommended list.