It may be too soon to try and guess which stocks will be the biggest winners and losers from the Donald Trump’s presidency. But that hasn’t stopped Mr Market from triggering 10% share price moves for two FTSE 350 stocks today. Both companies seem likely to be affected by some of his flagship policies.
What might this mean for shareholders?
This sweet deal could end
Sweetener group Tate & Lyle (LSE: TATE) is down 12% at the time of writing, making it the biggest faller in the FTSE 350.
Tate & Lyle has a very large business in the US. Last year, 75% of the group’s sales came from there, where it produces high fructose corn syrup (HFCS) for the food and drink industries. It also exports a significant amount of HFCS from the US to Mexico. According to broker estimates, about 10% of Tate’s earnings are generated in Mexican pesos.
Tate & Lyle now faces the risk that its export trade to Mexico could be disrupted, if Mr Trump fulfils his campaign promise to alter US trade deals. Even if this doesn’t happen, the sharp fall seen in the value of the Mexican peso since Tuesday could affect sales of US goods in Mexico.
Tate & Lyle is only just getting back on its feet after a series of profit warnings. Last week’s interim results showed that adjusted pre-tax profit rose by 22% to £140m during the first half of the year. The weaker pound boosted first-half figures by £15m, and was expected to provide a £40m boost to full-year profits.
Is the market overreacting?
Today’s 12% fall has taken Tate & Lyle’s share price back to levels last seen at the end of June. The gains seen since then have been wiped out, but the shares are still worth 10% more than they were at the start of 2016.
Today’s sell-off may have gone too far. So far, nothing has really changed for Tate & Lyle. But there’s definitely a risk that part of the group’s business could be disrupted. With the shares trading on a forecast P/E of 16 and offering a yield of 3.8%, I don’t see any reason to buy.
This stock is rising — here’s why
FTSE 100 equipment hire firm Ashtead Group (LSE: AHT) has bounced 11% higher today. The reason for this is simple. About 90% of Ashtead’s operating profit comes from its US hire business, Sunbelt Rentals.
Mr Trump is expected to announce plans to invest fresh cash in major infrastructure projects when he’s elected. This should boost demand for Sunbelt’s construction equipment. If this happens, then Ashtead’s plan to increase its geographical coverage by 50% over the next five years could prove to be very well timed indeed.
Of course, Ashtead’s growth plan is already well known. Sunbelt revenue rose by 20% last year, while operating profit climbed by 22%. Ashtead shares have risen by 21% so far in 2016.
Despite this strong performance, Ashtead looks quite reasonably priced. The shares currently trade on about 13 times forecast earnings with a 2% yield. This stock may be worth a closer look.