President-elect Donald Trump’s pledge to make government more efficient may spell bad news for companies that are overly reliant on government contracts to boost profits. Trump announced last week that when he returns to office Elon Musk, Tesla CEO, and Vivek Ramaswamy, founder of Roivant Sciences , will lead a group called the Department of Government Efficiency (DOGE) aimed at cutting spending. While the commission won’t serve as an arm of the government or receive official funding, it’s already looming over some stocks as investors evaluate the likelihood of cuts to federal contracts . The latest sign came on Tuesday when shares of Intuit and H & R Block slumped after the Washington Post reported that “the leaders of the group” have discussed creating a mobile app for free tax filing with the Internal Revenue Service. Given this overhang, Morgan Stanley’s sales team created a whole basket of stocks that have a large exposure to government spending. The screen looks at the following criteria for a general sense of how closely tied companies are to public funds: Lists of Prime Award Contract beneficiaries, sourced from USASpending. gov Relatively high revenue from government, as estimated by Morgan Stanley Notably, the list mostly excludes defense contractors, as Morgan Stanley expects them to be more insulated from budget cuts. Stocks in the basket include these 10: Moderna and Pfizer are two companies that made the basket. Shares have been hit hard since Trump said he planned to nominate Robert F. Kennedy Jr. as Health and Human Services secretary, raising concern because of his skepticism toward vaccines. Moderna shares have tumbled more than 60% so far in 2024, putting the biopharma name on track for its third straight annual decline. While the average analyst polled by LSEG has a hold rating, the consensus price target implies the stock will nearly double over the next year. Pfizer has slumped more than 13% so far in 2024, also on pace for its third straight annual loss. The typical analyst similarly has a hold rating, according to LSEG, with Wall Street’s average price target suggesting the stock will jump about 29% over the next 12 months. MRNA PFE YTD mountain Moderna and Pfizer, year to date Research and consulting firm Gartner was also included in the Morgan Stanley basket. The Stamford, Connecticut-based company is up 15% in 2024, trailing the S & P 500 but poised to advance for a 17th straight year. Still, the typical analyst surveyed by LSEG only has a hold rating on Gartner, with the consensus price target reflecting potential 5% appreciation over the coming year.
