By Nick Rokke, analyst, The Palm Beach Daily
It’s official. Tax cuts are coming.
On December 22, President Trump signed the most sweeping tax legislation in more than 30 years.
And that’s got the Palm Beach Research Group office abuzz.
Experts are debating whether tax cuts will be good for individuals. But at the Daily, we don’t debate politics. We’re about making money in the markets.
And there’s no debate that tax reform will be great for corporations.
Starting this year, the corporate tax rate will fall from 35% to 21%.
That means any company that had an effective tax rate of 35% in 2017 will be able to hang onto an additional 14% of their profits in 2018.
Anytime a company can hang onto more of its money, that’s good for stock prices.
But there’s another benefit for corporations in Trump’s plan… They’ll be able to “repatriate” money held offshore for a one-time low rate of 15.5%.
This won’t surprise regular readers…
Palm Beach Letter editor Teeka Tiwari predicted back in October that we could see over $2.6 trillion of offshore cash come back to the states once the tax bill becomes law.
Here’s what Teeka told me then:
The last time the U.S. had a cash “repatriation holiday” like this was in 2004. That’s when George W. Bush signed the Homeland Investment Act.
The act gave a one-time deduction of 85% from taxable incomes received from overseas.
That made the effective tax rate 5.25%, down from the normal 35%.
Over 90% of foreign cash was brought back within our borders.
And if it goes through, shareholders will be the No. 1 beneficiary.
Of course, the one-time 15.5% tax is much higher than what companies paid during the 2004 “repatriation holiday.”
But it’s still nearly 30% lower than the new 21% rate. So, we expect plenty of companies to take advantage of this one-time opportunity.
And they’ll use the additional money to fund new projects that increase profitability. Or, more likely, they’ll return the money to shareholders through dividends or buybacks.
No matter what happens, investors win.
How to Pick the Biggest Winners of Tax Reform
Not every company will benefit from this reform.
Companies not making a profit won’t be helped… They already pay zero taxes.
And any company that doesn’t operate overseas won’t get a one-time boost from the repatriation tax break.
The biggest beneficiaries will be profitable U.S. companies with large piles of overseas cash.
Here’s a list of 10 companies that pay a high effective tax rate… and hold a high percentage of cash overseas.
|Illinois Tool Works||ITW|
Now, this is very preliminary research. We haven’t done any more than identify the companies most likely to benefit from Trump’s tax plan. Do your due diligence before considering any of them.
But they’ll be at the top of our radar for the first quarter of 2018. And we suggest you keep your eye on them, too.
Tax reform will be a continuing story this year. And it will be a tailwind for these types of companies.
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. According to our research, President Trump’s tax reform package will become law on or around January 15, 2018… That’s when the printing press will start rolling…
Teeka’s just prepared an urgent white paper on how to tackle this once-in-a-lifetime opportunity. It’s called “The ‘All-Star Five’ Trump Refund Stocks for 2018.”
These five stocks alone have the potential to make you $29,520—virtually overnight. And Teeka wants to make sure you receive a copy of it. You can learn how to get your copy right here…
From Kunal G.: Best wishes for a happy and prosperous 2018 to Teeka and the entire team at Palm Beach Confidential. Please keep up the good work in 2018.
From Doug V.: I started cryptos on April 20, 2017, and I, too, have made an amazing number of mistakes, but I’m still over 10 times. It’s mostly because I was way overweight on one of your recommendations last summer. I probably would have done even better by following your instructions precisely, but we humans always have a hard time with that. Still, I’m sure there is still plenty of room to grow, so tell the newcomers to come on in. Thanks again.
From Mark M.: I wanted to start out the new year by thanking Teeka for all the work that has gone into Palm Beach Confidential as well as the quality of your communication and your honesty. I joined around mid-November—and except for getting my initial bitcoin purchase completed—it has been smooth sailing.
I am following your “let the game come to you” advice to the letter. While it’s a little frustrating having to wait for the right price, it’s well worth the wait. Since November 30, 2017, when I made my first purchase, I’ve recouped my entire membership fee and then some. All you need is personal discipline and Teeka’s fantastic information to successfully navigate the crypto landscape.
By the way, Teeka, I hope your opening day hunt was a success. I bagged a really nice 8-point in Texas this year.
On January 10, legendary speculator Doug Casey will reveal how he became a marijuana millionaire with one penny pot stock.
And the Casey Research team will also reveal their research on five pot stocks set to soar in 2018.
If you want to become a marijuana millionaire in 2018… you’re invited to attend. The event is free, but you must click here to reserve your spot.