Insights and Market Perspectives

How destructive are Trump tweets for corporations?

Author: Tony Genua

April 9, 2018

What do the New York Times, Rexnord, and Boeing all have in common? All of these companies:

  1. Were corporate targets of Trump tweets
  2. Briefly underperformed the S&P 500 during a period following the tweet
  3. Six months later, had outperformed the broader market

How destructive are Trump tweets for corporations?

Source: (left) Twitter, November 2016 (right) Bloomberg, April 2018

How destructive are Trump tweets for corporations?

Source: (left) Twitter, December 2016 (right) Bloomberg, April 2018

How destructive are Trump tweets for corporations?

Source: (left) Twitter, December 2016 (right) Bloomberg, April 2018

Granted, these tweets occurred in Q4 of 2016 and market conditions (more accurately, headline risks) were different then than they are now, but perhaps this serves as a reminder of the power (or lack thereof) of the Presidential tweet. Might Amazon join this exclusive club?

Indeed, Amazon has been subject to a relentless attack from POTUS 45 over the past week. Trump’s beefs with Amazon include its alleged exploitation of the U.S. Postal Service, using it as the company “delivery boy”, and Amazon not paying its full tax obligations. Media reports have widely connected Trump’s position against Amazon to Jeff Bezos’ personal ownership of The Washington Post, which has been critical of the President.

Our take on the situation:

  • Amazon exploitation of the U.S. Postal Service is likely fake news. U.S. Postal Service financials show that Shipping Packages & Services revenue has been growing at a ~14% CAGR since 2015, at a time when First Class and Standard Mail has been in secular decline. Simply put, e-Commerce has been keeping USPS afloat. Another way to look at it is – if Amazon did have an extremely unfair deal, one would expect revenue per parcel at USPS to be declining, since Amazon continues to become a bigger part of the mix. That is not the case as revenue per parcel has grown since 2015.


  • That Amazon could pay more in state sales tax is likely real news……but it’s not all bad. For context, the issue has to do with 3rd party sales (Amazon currently collects and remits sales taxes for sales made directly by Amazon). The issue of allowing states to impose sales tax collection on sellers without physical presence in the state is currently being deliberated by the U.S. Supreme Court. Assuming a worst case scenario, we have seen some analyst estimates claim a worst case impact to EPS of -7%. However, we would note that any Supreme Court decision that results in more online retailers collecting sales taxes might actually push retailers towards selling on Amazon, which currently offers its 3rd party sellers an optional sales tax collection service for a 2.9% fee based on the collected sales taxes (which presumably would become a more attractive proposition to retailers facing bigger sales tax compliance costs).


  • Does the market care about taxes? Given that Amazon’s forward P/E is currently 79x, a worst-case scenario mid-single-digit hit to EPS is unlikely to be the thing that derails the Amazon train. Investors who own and who have interest in Amazon aren’t deep value investors – rather they are likely more enthused by Amazon’s suite of high growth businesses and the potential to continue to disrupt the way we live and do business.


Bottom line –Though government regulation across Amazon’s business lines is an ongoing risk, the issues that Trump has brought forth thus far are likely either inaccurate (U.S. Postal Service) or not terribly alarming in our view (3rd party state taxes).  We expect to stay the course and wait for the current tweet storm on Amazon to pass, as we have seen in the past.




Commentaries contained herein are provided as a general source of information based on information available as of April 3, 2018 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.
References to specific securities are presented for illustrative purposes only and should not be considered as investment advice or recommendations. The specific securities identified and described herein should not be considered as an indication of how the portfolio of any investment vehicle is or will be invested, and it should not be assumed that investments in the securities identified were or will be profitable.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI is registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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© 2018 AGF Management Limited. All rights reserved.

Written by

Tony Genua

Senior Vice-President and Portfolio Manager

AGF Investments Inc.

Jonathan Lo, MBA

Vice President, Portfolio Specialist Group

AGF Investments Inc.

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