These Trump trades have ‘more to go,’ Jefferies says

Published Thu, Mar 2 201711:38 AM EST

With the market reaching a record high Wednesday, Jefferies told clients there are still attractive investment opportunities in stocks that will benefit from President Donald Trump's economic agenda. "Our latest foray into understanding the implications of potential policy change looks at the 'Trump' stocks in the 'commodity cyclical' sectors. These groups are levered to GDP and are likely beneficiaries of higher inflation ... Jefferies analysts have also identified stocks in these sectors with company specific attributes that may result in even better performance," the firm's research team wrote in a Thursday note titled "Trump stocks in Trump sectors; market hasn't fully rewarded likely winners." "The short list of 'Trump stocks' selected by Jefferies analysts has outperformed the industrials and materials, but the analysts believe there's more to go if change is implemented," the report added. Here are some of the names that made the firm's recommended list. Source: FactSet Jefferies aerospace and defense analyst Howard Rubel estimates a corporate tax rate reduction to 20 percent will add 5 to 15 percent of incremental earnings to the companies he covers. He noted that the defense industry generates approximately 90 percent of its income in the U.S. and manufacture largely domestically. Boeing is the analyst's "top pick, has an effective tax rate in the 31-32% range and sees a substantial one-time benefit from the reduction in its ~$14.5 billion deferred tax liability. Howard sees opportunities for more than mid-single-digit growth and believes the market has not appreciated the company's growth prospects," the report said. Rubel has a $200 price target for Boeing, representing 9 percent upside from Wednesday's close. Source: FactSet Jefferies chemicals analyst Laurence Alexander said every 5 percentage point reduction in tax rates will add an incremental 3 percentage points to the industry's earnings. The analyst said, " Praxair … would be the top beneficiary of tax reform within his space" as it generates 44 percent of its sales domestically. Alexander has a $140 price target for Praxair, representing 16 percent upside to Wednesday's close. Source: FactSet Jefferies equipment rental analyst Justin Jordan has a $150 price target on United Rentals , representing 12.5 percent upside to Wednesday's close. "U.S. rental spend has increased faster than U.S. construction spend as rental penetration has risen in recent years," the note said. "Justin found that URI had disproportionate exposure to the 'forgotten states,' states that could benefit from Trump polices given higher manufacturing exposure, and more labor slack." Source: FactSet Jefferies metals and mining analyst Seth Rosenfeld has a $77 price target on Nucor , representing 20 percent upside from Wednesday's close. "Nucor is one of Seth's top picks levered to an improving U.S. macro environment and set to benefit from potential Trump policy changes in light of the company's construction exposure," the note said. "Construction is the largest end market in U.S. steel consumption at c.40% and any incremental government plans to boost infrastructure spend would likely help drive improved steel consumption in the years ahead." Other companies on Jefferies' recommended list included GCP Applied, Halliburton , International Paper, Oshkosh, Packaging Corp. of America, RPC, Textron, WestRock and United States Steel.

President Donald Trump gestures while arriving for a joint session of Congress in Washington, D.C., U.S., on Tuesday, Feb. 28, 2017.

Jim Lo Scalzo | Pool Image via AP

With the market reaching a record high Wednesday, Jefferies told clients there are still attractive investment opportunities in stocks that will benefit from President Donald Trump's economic agenda.

"Our latest foray into understanding the implications of potential policy change looks at the 'Trump' stocks in the 'commodity cyclical' sectors. These groups are levered to GDP and are likely beneficiaries of higher inflation ... Jefferies analysts have also identified stocks in these sectors with company specific attributes that may result in even better performance," the firm's research team wrote in a Thursday note titled "Trump stocks in Trump sectors; market hasn't fully rewarded likely winners."

"The short list of 'Trump stocks' selected by Jefferies analysts has outperformed the industrials and materials, but the analysts believe there's more to go if change is implemented," the report added.

Here are some of the names that made the firm's recommended list.