Last Sunday we covered both sides of the Big Beautiful Bill (B3) debate—problems with runaway debt versus America's unique advantages that might allow the country to grow its way out of the hole. This week we’ll talk about homing in on undervalued opportunities in light of the new bill.
Short-Term Plays (6-18 months)
The B3 is helpful to energy companies because of the clean energy incentive rollbacks and tax breaks for traditional oil and gas companies. So focus in on the energy sector for strong opportunities. As for banks, potentially higher interest rates from increased government borrowing could help their profits; however, degrading credit quality is a concern. Keep an eye out for banks trading below book value (low price-to-book ratios) with conservative lending practices that can help mitigate looming credit risk. Note a bank's balance sheet is mostly composed of cash, loans, and securities, so the value of these assets is much closer to their stated "book value."
Mid-Term Opportunities (2-5 years)
Over the next few years, we can expect infrastructure companies and defense contractors to benefit from a multi-year tailwind from the B3’s $350B allocation to national defense and border security. Check out the article on defense companies from last month for some ideas.
Healthcare companies serving higher-income demographics or those with strong pricing power could outperform, despite the potential for 17 million Americans losing their coverage over the next decade. Pharmaceutical companies with strong patent portfolios trading at discounted multiples deserve attention.
Long-Term Thinking (5+ years)
This is where America's unique advantages—what we discussed last week—really matter for investors. The dollar's reserve currency status isn't going anywhere soon, and that benefits companies tied to global trade infrastructure and international commerce.
Demographics and potential immigration policy flexibility create long-term opportunities in companies serving growing populations or benefiting from labor force expansion. Think beyond the headlines to the decades-long trends.
Above all, America's innovation economy is second to none. American companies driving real productivity gains through automation, Artificial Intelligence, or operational efficiency could compound wealth over decades, especially if you can buy them at attractive valuations today.
Given this context, I'm using UVstocks.io data and insights to screen for companies with:
The B3 introduces lot of uncertainty and potential downstream turbulence, but it also creates opportunities for investors willing to do some basic research.
On the surface, the fiscal trajectory doesn’t look great, but hasn’t usually in the past during America’s best investment periods. The key is to look for quality companies trading at discounts that represent mis-priced opportunities where you essentially pay a little to get a lot. Also stay diversified across time horizons, and keep in mind that America has grown its way out of worse situations before.
“Price is what you pay. Value is what you get.” — Warren Buffet
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P.S. I'm sharing some investment information, but it's important to remember that what I'm providing is for informational purposes only and should not be construed as financial advice.
Happy Investing,
John
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