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Growth stocks can take our portfolios to the next level, just as Donald Trump wants to send the US economy into overdrive. But which companies may benefit from the returning President? However, the proposed tax cuts should benefit most US businesses in some way, while the tax rates will help some firms to a certain extent. However, here are two companies that have specific reasons to benefit.
SpaceX competition
SpaceX may have made more headlines in recent months given Elon Musk’s alliance with Trump, with the company likely to benefit from the new US government’s wishes. However, Rocket Lab (NASDAQ:RKLB) is one of SpaceX’s most listed and cheapest shares and should also benefit from additional operations in the space sector.
Rocket Lab may not be ready for Mars, but it has some distinct advantages over SpaceX. This includes the cost effectiveness of dedicated launches in the payload class of up to 13 tons and the upcoming Neutron ‘launch vehicle’. Its dedicated launch capabilities and reputation for precision orbital placement also suggest it’s not worth a huge discount to SpaceX (that unlisted company recently bought shares from employees raising the value to $350bn compared to Rocket Lab’s $13.7bn).
Since trading opened on Tuesday (January 21), Rocket Lab’s stock is up 30%. This follows Trump’s recent comments about prioritizing space exploration at his inauguration. This actually worries me as I picked up the stock on Friday, noting its market cap of $1.8trn in 2035, but I couldn’t buy the stock before the market opened on Tuesday.
Are there any risks? However, some are related to SpaceX. While there may be room for more players in the industry, there is a risk that SpaceX, given its strong balance sheet, rapid innovation, and Trump connections, could garner a large share of government contracts. I am not convinced by this argument, but time will tell.
Frankly, I wish I had bought this stock a week ago. But I can also say that for other companies on my watch list, incl Office again New Solutions and Support. At this high price, I will have to reevaluate my interest in Rocket Lab.
AI provides efficiency
I’m not very serious Palantir Technologies (NASDAQ:PLTR) but I know many people think this software company will go far. This is because this company, which embeds AI in its platforms to help with data integration, decision-making, and high-level operations, was founded by Peter Thiel – a supporter of Trump and the founder of PayPal (Elon Musk is also involved) .
However, it would be wrong of me to suggest Thiel’s closeness to Trump is the only reason this business has been successful. The company has a long history of working with the US defense and intelligence agencies and its Starlab space station organization that aligns with Trump’s ambitions in space. In addition, its platforms also deliver significant efficiencies that can help reduce government bloat.
The risks of investing in Palantir lie in the valuation. It’s worth an extraordinary 173 times forward earnings – very similar to Musk’s Tesla balancing. Although the expected growth rate is very strong, the price-to-earnings-growth (PEG) ratio stands at about seven times. As such, I do not expect to add this stock to my portfolio.
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