Skip to main content

The Republican sweep of U.S. Congress and the White House has been especially well-received by the small-cap space.

While the S&P 500 index of the largest U.S. stocks has increased by a respectable 2.8 per cent since election day, the Russell 2000 small-cap index has shot up by 11.1 per cent over that same time.

Smaller companies typically have a more domestic focus, so their shares tend to be bigger winners when the U.S. economy's prospects improve.

President-elect Donald Trump's pro-business tilt, combined with his isolationist attitude toward trade, have investors increasingly hopeful for domestic growth.

"We believe the best way to position portfolios for an all-Republican Washington is to focus on those investment characteristics poised to benefit most from pro-growth policies," Jonathan Golub, chief U.S. market strategist at RBC Dominion Securities, said in a note.

Mr. Golub provided a list of 40 small-cap U.S. stocks poised to benefit from the next U.S. administration. This follows an earlier report suggesting 40 larger U.S. stocks constituting a "Trumped-up portfolio." Both lists are provided below.

The stock picks were chosen based on five portfolio tilts:

1. Value – Stocks with relatively low price-to-earnings ratios tend to outperform in periods of stronger growth

2. Domestic orientation – These stocks are more insulated from U.S. dollar strength

3. Operating leverage – Economically sensitive businesses with higher fixed costs should benefit from stronger economic growth

4. Taxes – Companies with relatively high effective tax rates could be bigger winners if corporate tax rates are changed

5. High-volatility – These names tend to be less sensitive to rising interest rates

RBC's list of U.S. stocks poised to benefit from Trump

Large-Cap Stock Picks
AmerisourceBergen Corp.ABC-N
Legg Mason Inc.LM-N
Alliance Data Systems Corp.ADS-N
Lincoln National Corp.LNC-N
Aetna Inc.AET-N
Southwest Airlines Co.LUV-N
Alaska Air Group Inc.ALK-N
Macy's Inc.M-N
Ameriprise Financial Inc.AMP-N
McKesson Corp.MCK-N
AutoNation Inc.AN-N
Navient Corp.NAVI-Q
Anthem Inc.ANTM-N
Norfolk Southern Corp.NSC-N
Bed Bath & Beyond Inc.BBBY-Q
PNC Financial Services Group Inc.PNC-N
BB&T Corp.BBT-N
Ryder System Inc.R-N
Best Buy Co. Inc.BBY-N
Regions Financial Corp.RF-N
Cardinal Health Inc.CAH-N
Staples Inc.SPLS-Q
Capital One Financial Corp.COF-N
Southwestern Energy Co.SWN-N
Discover Financial ServicesDFS-N
TEGNA Inc. TGNA-N
Express Scripts Holding Co.ESRX-Q
Tesoro Corp.TSO-N
Freeport-McMoRan Inc. FCX-N
Unum GroupUNM-N
Gap Inc.GPS-N
Urban Outfitters Inc.URBN-Q
Huntington Bancshares Inc.HBAN-Q
United Rentals Inc.URI-N
Nordstrom Inc.JWN-N
U.S. BancorpUSB-N
CarMax Inc.KMX-N
Wells Fargo & Co.WFC-N
Kohl's Corp.KSS-N
Zions Bancorp.ZION-Q
Small and Mid-Cap Stock Picks
Akorn Inc.AKRX-Q
HollyFrontier Corp.HFC-N
Albany Molecular Research Inc.AMRI-Q
Kirkland's Inc.KIRK-Q
American Woodmark Corp.AMWD-Q
KapStone Paper and Packaging Corp.KS-N
ArcBest Corp.ARCB-Q
Lannett Co. Inc.LCI-N
Ascena Retail Group Inc.ASNA-Q
Motorcar Parts of America Inc.MPAA-Q
Blucora Inc.BCOR-Q
NeuStar Inc.NSR-N
Big Lots Inc.BIG-N
Old Republic International Corp.ORI-N
Bank Mutual Corp.BKMU-Q
PetMed Express Inc.PETS-Q
BofI Holding Inc.BOFI-Q
PharMerica Corp.PMC-N
Caleres Inc.CAL-N
Rent-A-Center Inc.RCII-Q
Celadon Group Inc.CGI-N
REX American Resources Corp.REX-N
Depomed Inc.DEPO-Q
Roadrunner Transportation Systems Inc.RRTS-N
Denbury Resources Inc.DNR-N
SkyWest Inc.SKYW-Q
DXP Enterprises Inc.DXPE-Q
SPX Corp.SPXC-N
Encore Capital Group Inc.ECPG-Q
Tailored Brands Inc.TLRD-N
eHealth Inc.EHTH-Q
TrustCo Bank Corp.TRST-Q
Essendant Inc.ESND-Q
Universal Insurance Holdings Inc.UVE-N
First Midwest Bancorp Inc.FMBI-Q
Marriott Vacations Worldwide Corp.VAC-N
GameStop Corp.GME-N
Vera Bradley Inc.VRA-Q
Genworth Financial Inc.GNW-N
World Acceptance Corp.WRLD-Q