When Donald Trump goes to Twitter Inc. (TWTR) to voice his negative opinions, investors should begin trying to find opportunities. Over just the past few weeks we have seen two separate occasions in particular in which the President of the United States has directed negative tweets at specific industries or companies. In both cases, first with Amazon.com Inc. (AMZN) and more recently with The Organization of Petroleum Exporting Countries (OPEC), his tweets have sent asset prices lower for a short period, before they have recovered, opening up big opportunities for investors.
The end of March, beginning of April, Donald Trump assaulted Amazon with some tweets. First, it was that the company paid little to no state and local government taxes and then it was that the e-commerce company was a ‘scam’ which costs the US Post Office and therefore the American people, billions of dollars a year. Another string of tweets pointed the finger at Amazon claiming it was the reason thousands of retailers were going out of business, and millions of US workers had been laid off.
The tweets from Trump sent Amazon shares lower each day he would reignite his attack on the e-commerce giant. A 1-month chart of Amazon shows how the stock fell during the Presidents attacks and has since recovered.
From Yahoo Finance
Despite the fact that the President attacked Amazon and no real solution has come from the issues he pointed out, Amazon’s recovery appears to be nearly complete. This is not to say that the problems with Amazon not paying taxes or its contract with the Post Office couldn’t be reignited again in the future. But as most analysts have noted, the Presidents threats and claims against Amazon have no real teeth.
For example, the contract with the Post Office is a multi-year deal which would be hard to cancel. Plus, many believe Amazon’s relationship with the Post Office is helping the USPS more than it is hurting it. As for the tax situation, Amazon already pays sales tax in 45 states on merchandise for sales it makes direct. But, no sales tax is collected or paid on third-party sellers unless they have a physical location in the state the merchandise is being purchased in. A change to this rule would only further hurt the ‘small’ business’s Trump claims Amazon has hurt. While we are on that topic, Wal-Mart Inc. (WMT) was accused of hurting small businesses years ago, so this is not a new issue large retailers have had to deal with, the antagonist has just changed.
When it comes to Trump's latest attack, this time on OPEC as the price of oil has risen in recent months and just last week hit its highest level since November 2014, similar to the attacks against Amazon, many believe Trump really has no teeth in the matter.
Trump has tweeted, “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”
One analyst noted that all Trump could do is drain the US’s Strategic Petroleum Reserve. And at this time there doesn’t appear to be any indication the White House has plans to do that. Another noted they had a hard time seeing OPEC members being “swayed” by Trump's comments and didn’t see the group “changing course, in terms of their policy.”
Trump's tweets put pressure on oil for a short time immediately after they were sent but haven’t seemed to slow oil’s rise higher.
Investors may want to start looking at a few oil and gas Exchange Traded Funds which will certainly benefit from higher oil prices. If you want to invest directly in oil, the United States Oil Fund LP (USO) or PowerShares DB Oil Fund (DBO) are two good options. These funds trade crude oil future contracts. Another option would be buying oil and gas equity ETFs such as the Energy Select Sector SPDR Fund (XLE) or the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). These funds will give you exposure to the companies making money from the higher oil prices. Lastly, you could get a lot riskier and buy something like the Direxion Daily Energy Bull 3X Shares ETF (ERX) which is three times leveraged ETF that invests in the S&P Energy Select Sector Index. That index is a market-cap weighted index of US energy companies that are found within the S&P 500.
The commodity funds and the leveraged fund would be investments that really shouldn’t be held for long periods of time due to their costly exposure to futures contracts and constantly rebalancing. Therefore, these should only be bought if you see a quick dip and believe prices will rebound within a day or so.
The XLE and XOP can be held for long periods of time due to their low expense ratios and minimal rebalancing. So if the quick trade and high risk is not your thing, these are much better options, especially if you think Trump will keep tweeting about OPEC and high oil prices.
It’s hard to say where the President will focus his attention next. But, as we have seen with Amazon and OPEC, Trump has little follow through and little enforceable action. At the end of the day, these attacks have been short-term and simply opened the door for opportunistic investors.
For those who want to get the news first, should follow Donald Trump on Twitter @realDonalTrump. His next target may come days, weeks, or even months from now, so be patient and wait for the right opportunity. If Trump has proven anything to us, its that eventually he has a hard time keeping his mouth shut for long periods of time.
Disclosure: This contributor held positions in Twitter and Amazon.com at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.