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These Are The Stocks To Buy When Trump Ascend To His Throne
[Image: fun_bank_stocks.png]

Almost nothing went the way it was supposed to in 2016. And yet, though many investors were wrong about the U.K.’s Brexit vote and the American presidential election, few ­ended up disappointed by their portfolios. Just before Thanksgiving, all four major U.S. stock market indexes closed at record highs—the first time that’s happened since 1999. If the year taught investors anything, it’s not to bet on predictions. As John Toohey, head of equities at USAA Investments USAA 0.00% , says of the unexpected outcomes, “You sort of question, ‘Is the market right, are the polls right, on anything?’ ”
One prediction, at least, seems safe: Post-election euphoria won’t mean stocks are without risk. With an aging bull market in the U.S. nearing the end of its seventh year at press time, it’s difficult to find safety in cheap stocks; even formerly stodgy dividend payers now trade at dangerously expensive valuations. “You have to have a radically maverick portfolio to have a shot at a classic target of 5% real [annual] returns,” says Research Affiliates CEO Rob Arnott.
While top portfolio managers see a lot of promise in 2017, they’re pinning their most bullish hopes on mysteries that only time will unravel. Will President Trump roll back regulations, from Dodd-Frank to the Affordable Care Act? Will France or Italy take Britain’s lead and exit the European Union? Will oil continue its rally? Most important, will the U.S. economy finally get the jump-start it has been waiting for since the financial crisis? As ClearBridge Investments managing director Margaret Vitrano says, “I hate talking politics, but you kind of have to now as you’re thinking about 2017.”
With that in mind, Fortune has canvassed the industry’s top stock pickers to find the companies they’re betting will rise even if nothing goes as expected in 2017. Some are familiar, some you won’t have heard of, but they’ve all got potential for impressive growth, no matter what shocks the new year might bring.

Unlocking the vault for shareholders
Most banks’ profit margins should rise with interest rates, but some stocks will get a bigger jolt than others.
Call it the Janet Yellen head fake. When the Federal Reserve hiked interest rates in December 2015 for the first time in nearly a decade, Wall Street expected it to be the beginning of a trend. But since then the Fed has done little beyond generate a strong sense of déjà vu: At press time, Fed policymakers were strongly hinting they would implement another December rate hike. Still, while long-term bond interest rates have recently drifted up—with investors expecting higher inflation and federal deficit expansion under a Trump administration—rates remain at historic lows. “We’re really just back to where long-term interest rates were at the beginning of this year,” says Ed Perks, CIO of Franklin Templeton Equity Group.
The companies with the most skin in the game are banks, whose profit margins generally improve as rates rise—and whose stocks have recently soared in anticipation. Perks singles out Bank of America BAC -0.84% as “a clear beneficiary.” It will collect at least twice as much from rising rates as its peers largely because it has the biggest stockpile of deposits—nearly $450 billion—on which it doesn’t pay out interest (e.g., checking accounts). If the Fed hikes rates by one percentage point in 2017, Bank of America expects to collect an additional $5.3 billion.
In recent years investors have punished Citigroup C -0.15% , assuming that heavy regulation will doom it to lower, utility-like returns—but without giving the company credit for being less risky, says Bill Nygren, manager of the $14.8 billion Oakmark Fund. Case in point: Citi immediately tripled its dividend after passing the Fed’s latest stress test. “If … investors start to value Citigroup like it’s an electric utility, it should trade at a much higher stock price,” Nygren says.

Bank of America BAC -0.84%
Citigroup C -0.15%

Exuberance again in the U.S.
These companies could benefit from confident consumers and federal stimulus spending.

[Image: fun_confidence_consumption.png]

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