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Trumped Down Stocks

Overall, the stock market soared after Donald Trumpís surprise election victory, and many stocks have arguably gone too far, too fast.

But not everything fits that description. Here are two stocks and one fund that dropped after the election, but in my view are likely to recover.

Store Capital (STOR): a Real Estate Investment Trust (REIT), Store owns 1,500 single tenant commercial properties in 48 states that it leases to retail stores, chain restaurants, health clubs, etc.

Store, which went public in November 2014, is still in fast growth mode. For instance, its September quarter revenues came in 30 percent above year-ago.

However, many market pundits expect that the Trump administrationís economic growth plans could stoke inflation, which would drive prevailing interest rates higher. Conventional wisdom says that REITs underperform in rising interest rate environments. Consequently, Storeís share price dropped nine percent in November. But my research found that, in this instance, conventional wisdom is wrong. In fact, both share prices and dividends of REITs such as Store Capital would move up, not down in those times. Storeís dividend yield is 4.7 percent.

Kraft Heinz Company (KHC): A result of the July 2015 merger of Kraft Foods and the Heinz Company, Kraft Heinz sells packaged foods globally. Brands include of course, Kraft and Heinz, but also Jell-O, Kool-Aid, Maxwell House, Ore-Ida, Oscar Mayer, Philadelphia, Planters, etc. The company is still in the early stages of harvesting the benefits of its 2015 merger, but things are looking up already. For instance, September quarter earnings soared 89 percent over the year-ago quarter. Trumpís tough talk about canceling NAFTA and other global trade agreements sunk Kraft-Heinzís share price by nine percent last month. But, probably, none of that will happen. Kraft Heinz is paying a 2.9 percent dividend yield.

Pimco Municipal Income Fund II (PML): This a closed-end fund that holds bonds and other securities that are exempt from federal income taxes. Hence, the dividends that you receive from this and similar funds are also federal tax exempt. Thus, this fundís 6.5 percent dividend yield would be equivalent to a 7.6 percent to 10.0 percent equivalent taxable yield, depending on your tax bracket.

If youíre unfamiliar with the term, closed-end funds are similar to conventional mutual funds except the fund itself only issues shares at the IPO. After that, shares trade like stocks. You buy and sell from or to existing holders.

Rising interest rate worries have been pressuring municipal bond prices since September. Then, concerns that Trumpís economic policy could drive interest rates even higher than previously expected further pressured PML. So, in all, PMLís share price has dropped around 13 percent over the past three months.

Politics : Changes Take Time

Again, in what is turning out to be a recurring theme here, when the dust settles, the new administrationís economic changes probably wonít turn out to be as inflationary as originally feared, and inflation fears will eventually abate. 

Those are my ideas. But donít take them as gospel. Do your own research. The more you know about your stocks, the better your results.

published 12/12/16

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