By Nick Rokke, analyst, The Palm Beach Daily

We’ve been following President Trump’s Twitter feed pretty regularly over the past year. Not because we like the drama… but because we want to make money.

And we’ve done a pretty good job so far in identifying which of his tweets will lead to the most profitable opportunities in the markets.

(For instance, last month we told you this tweet would be good news for your portfolio.)

You see, following the president’s tweets can show us where the government is spending billions of federal dollars… or which policies will benefit specific industries.

We’ve used this strategy to successfully bet on financials in February 2017… biotech in March 2017, and steel and coal in June 2017.

This tweet from January 17 was the latest to grab our attention…

The Apple Effect

In the tweet above, President Trump boasted about the tax law he signed on December 22, 2017. Trump said the law is working. And so far, he’s been right…

Last week, Apple became the first major U.S. company to announce it would bring back most of its overseas cash under the president’s new tax law.

Regular readers won’t be surprised by this… In the August 28, 2017 issue of the Daily, Palm Beach Letter editor Teeka Tiwari predicted Apple would bring back billions after the tax cuts were passed. Here’s what he wrote before the law was passed:

Today, Apple has $230 billion in foreign cash. Based on history, we expect Apple to repatriate 90% of that cash, or $207 billion.

Although Apple didn’t reveal how much cash it would bring home in its most recent announcement, the company expects to pay a one-time tax of $38 billion.

Trump’s tax law has a one-time tax rate of 15% on overseas cash. So, that implies Apple plans to repatriate about $245 billion.

Remember, Teeka’s prediction was last summer—and Apple has grown since then—so he wasn’t that far off the mark. It just means Apple will bring home more money… and spread more profits to investors.

If you followed Teeka’s advice in August and picked up Apple, you’d be up 15% today. That beats the market by a couple of percentage points.

Today, I’ll show you why it’s still not too late to profit from Trump’s latest tweet.

The Companies That Will Benefit From Tax Reform

Apple isn’t the only company bringing money home.

Large financial institutions like Citigroup, Goldman Sachs, Bank of America, and JPMorgan Chase all announced they plan to repatriate billions in overseas profits.

And this is just the tip of the iceberg. We’ll know for sure how many more companies will bring back cash when they release earnings.

Most of the companies that report a “one-time tax charge” on their earnings statements will likely have repatriated foreign profits. The bigger the tax charge, the more money they brought back.

And it’s just a matter of time until these companies start returning that capital through increased dividends or stock buybacks… or using that cash on initiatives to increase profits.

Regardless of what they choose, investors will be big winners.

Just like Apple, the biggest beneficiaries of the tax law will be profitable U.S. companies with large piles of overseas cash. Here’s a list of 10 that fall into the category:

Company

Ticker

3M

MMM

Apple

AAPL

Bristol-Myers Squibb

BMY

Caterpillar

CAT

Cisco Systems

CSCO

Foot Locker

FL

Illinois Tool Works

ITW

PepsiCo

PEP

Symantec

SYMC

Ralph Lauren

RL

Now, we’ve just identified companies with a high percentage of foreign cash compared to their market cap. You need to do further research.

Never invest in a company for just one reason… A struggling company won’t save itself simply by repatriating overseas profits. Do your due diligence.

Nevertheless, repatriating capital could be the catalyst that sends a quality company higher. And that’s why we’re looking at companies like Apple right now.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

CHART WATCH

The Buck Is About to Get Flushed

By Jeff Clark, editor, Market Minute

The U.S. Dollar Index has been in a strong downtrend for over a year. It’s fallen over 5% in just the past two months.

When we looked at the dollar earlier this month, we noted the index was headed toward its September low at about 91 (the second horizontal red line on the chart below). And we cautioned that, if that level did not hold as support, then there was a lot more room to fall before the dollar reached its next support level.

See chart below…

After a couple of days of trying to gain some footing, the index turned lower again Monday. It’s oversold. And investor sentiment (a contrary indicator) is quite bearish on the buck.

That might be enough to cause a short-term bounce. But I don’t think so.

Look at the MACD and RSI indicators at the bottom of the chart. There’s no sign yet of any positive divergence. This tells us the downtrend is strong and likely to continue.

To me, it looks like the dollar is on the verge of a “flush-out” move.

A flush-out is that final, dramatic decline that occurs at the end of a prolonged downtrend. Investor sentiment is usually quite bearish. Technical conditions are almost always oversold. Yet, in spite of all that, the asset still can’t manage to bounce.

That’s when the last of the holdouts finally throw in the towel. They’re exhausted from holding on to a position that does nothing but fall. So, they finally hit the “sell” button.

I expect that’s what will cause the next big drop in the dollar—which should bring it to its next support line (the first red horizontal line on the chart), about 3% lower from here.

In turn, that action is likely to spark another nice move higher in gold.

—Jeff Clark

P.S. If you’d like to receive my free daily market insights in the Market Minute, click here and I’ll automatically add you to my list. You’ll also receive a link to my “Guide to Options Trading” just for signing up. This free report will teach you how to trade options the right way… and dramatically boost your overall returns.

MAILBAG

From Doug I.: Stop with the long promotional advertisements. I don’t have time to watch a 1-hour movie when I can read the transcript in 20 minutes. Please also send text for us who have more important things to do besides watch a movie!

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I called a different customer service number for you and this time my call was answered in an acceptable time by Desiree. She was very professional, and with some persistence, found my account and issued me a new password. She also checked on the delivery status of my book.

Desiree turned a very exasperating experience into a ray of sunshine. I look forward to being a subscriber of The Palm Beach Letter.

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