Goldman says these stocks will benefit from some provisions in the tax bill

Goldman Sachs identifies Kodiak Gas Services, Shake Shack, RH, and Valvoline as potential beneficiaries of President Trump's proposed tax bill, which includes provisions like full expensing of domestic factories and more generous deductibility of interest expenses. Goldman analysts believe small-cap companies with high capital spending and domestic exposure stand to gain the most, citing their sensitivity to tax policies; however, the bill's passage through the Senate remains uncertain due to disagreements over Medicaid cuts and other provisions.

Analysis

Goldman Sachs has identified a select group of small-cap stocks, including Kodiak Gas Services (KGS), Shake Shack (SHAK), RH (RH), and Valvoline (VVV), poised to benefit from President Trump's proposed tax bill, which recently passed the House. Key provisions, such as the "full expensing of domestic factories" and more generous deductibility of interest expenses, are central to this outlook, with Goldman analysts noting that small-cap firms with high capital spending, domestic focus, existing leverage, and typically higher tax rates are particularly sensitive to such policy changes. Kodiak Gas Services, despite a 16% year-to-date stock decline through Thursday in 2025, garners a buy rating from 90% of FactSet-polled analysts, with a consensus price target suggesting 30% upside; Goldman specifically projects a solid demand outlook for its compression services, stable capital expenditure, and margin improvements supporting free cash flow and potential share repurchases. Conversely, Shake Shack, down nearly 10% year-to-date, faces a more divided analyst consensus with 52% holding a buy-equivalent rating. The legislation's path through the Senate remains arduous, with disagreements over issues like Medicaid cuts, and economists warn the bill could significantly increase national debt, potentially fueling a rise in U.S. Treasury yields.

Key Decisions for Investors

• Monitor the legislative progress of President Trump's tax bill in the Senate, as its passage is the primary catalyst for the identified small-cap opportunities.
• Evaluate potential investments in small-cap companies characterized by high domestic capital spending and tax sensitivity, such as Kodiak Gas Services, which benefits from strong analyst support and a specific positive outlook from Goldman Sachs, contingent on favorable legislative developments.
• Remain cognizant of macroeconomic risks, particularly the potential for rising U.S. Treasury yields driven by increased national debt if the bill is enacted, which could temper equity market enthusiasm.
• Conduct thorough due diligence on individual names like Shake Shack, RH, and Valvoline, considering their fundamental strengths and weaknesses beyond the singular tax catalyst, especially given mixed analyst sentiment for some.