December 8, 2016, 4:00pm EST

Stocks continue to print new highs.  And many continue to doubt the rally (as they have for much of the post-crisis recovery).

They continue to say stocks are priced for perfection, implying that stocks are expensive, and/or that investors are assuming a perfect Presidency from Trump. But remember, we’ve talked about the massive fundamental and technical performance gap that has still yet to be closed, dating back to the 2007 pre-crisis peak.  I did this analysis again just a few days after the election. You can see it here: “The Trump Effect Will Make Stocks Extraordinarily Cheap.”

Now, a few days ago, we talked about buying the stocks of the guests of Trump Tower.  Goldman comes to mind, as the Wall Street powerhouse has been well represented in the Trump plan, including the new Treasury Secretary appointment.  Goldman is the best performing Dow stock over the past month. And we talked about the meeting with Japanese investor, Masayoshi Son, at Trump Tower this week.  Son’s gigantic (80%+) stake in Sprint is up 11% since Tuesday.

With that said, the billionaire activist investor, Carl Icahn, has been out doing interviews the past two days.  Let’s talk about Icahn, because there is perhaps no one investor that should benefit more from the Trump administration. Remember, Icahn was an early supporter for Trump.  He’s been an advisor throughout and has helped shape policy plans for the President-elect.

What has been the sore spot for Icahn’s underperforming portfolio the past two years?  Energy.  It has been heavily weighted in his portfolio the past two years.  And no surprise, he’s had steep declines in the value of his portfolio the past two years.

But Icahn doesn’t see his energy stakes as bad investments. Rather, he thinks his stocks have been unfairly harmed by reckless regulation.  For that, he’s fought. He’s penned a letter to the EPA a few months ago saying its policies on renewable energy credits are bankrupting the oil refinery business and destroying small and midsized oil refiners. And now his activism looks like it will pay off.  Yesterday we got an appointee to run the EPA that has been vetted by Icahn (as he said in an interview today) — it’s an incoming EPA chief that was suing the EPA in his role as Oklahoma attorney general.  Safe to assume he’ll be friendly to energy, which will be friendly to Icahn’s portfolio.
Icahn’s publicly traded holdings company is already up 28% from election day (just one month ago).  But it remains 56% off of the 2013 highs.  This is the portfolio of an investor (Icahn) with the best track record in history (30% annualized for almost 50 years).  IEP might be one of the best buys in the market.

We have three Icahn owned stocks in our Billionaire’s Portfolio.  Follow me and look over my shoulder as I follow the world’s best investors into their best stocks. Our portfolio is up more than 27% this year. You can join me here and get positioned for a big 2017.

November 16, 2016, 4:00pm EST

Yesterday we talked about the missing piece in the pro-growth rally in markets.  It’s oil.  A pick-up in demand and growth, tends to also accelerate demand for oil.

But the market is holding out for the November 30 OPEC decision.  They’ve told us they plan to cut.  The inventories have jumped in recent weeks, suggesting producers are ramping up production into a cut (taking advantage while they can).  And Russia’s energy minister said today he thinks OPEC members will agree to terms on a production cut by the November 30 meeting.

With that, oil spiked this morning, but fell back from the highs — still hanging around the $45 area.

Today I want to talk about the performance of small caps over the past week compared to the broader market.  If we consider a Trump economy where regulation will be peeled back, a few areas come to mind as being among winners:

Banks:  Banks have been crushed by Dodd Frank, made into utility companies.  This is the legislation that responded to the global financial crisis — where banks had become hedge funds, taking massive-leveraged-speculative bets against their deposit base.  When the black swan event occurred, they became exposed and were bailed out to keep the financial system alive.  Those days should never return, but the pendulum swung too far in the other direction on Dodd Frank.  In a Trump economy, risk taking will almost certaintly return to the banking system again.  The XLF, bank ETF, is up 10% in the past week.

Energy:  The energy industry has been crushed under the weight of clean energy policies.  Billionaire Carl Icahn, one of Trump’s biggest advocates and once thought to be a candidate for Treasury Secretary, penned a letter to the EPA a few months ago saying their policies on renewable energy credits are bankrupting the oil refinery business and destroying small and midsized oil refiners. Icahn happens to own a controlling stake in one, CVR Energy (CVI).  The stock is up 30% in the past week.

Small caps:  The common theme in the above two industries is that all companies have been hurt, but the burden of increased regulation has been far a greater economic and financial cost to small companies.  That’s why the Russell 2000 (small cap index) is racing higher in the President elect Trump era.  The small cap index is outperforming the S&P 500 by 5 to 1 since Tuesday of last week.

Follow me in our Billionaire’s Portfolio, where you look over my shoulder as I follow the world’s best investors into their best stocks.  Our portfolio is up 20% this year.  That’s almost 3 times the performance of the broader stock market. Join me here.