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6 Stocks Set to Gain as U.S.-China Trade Tensions Ease

Swarup Gupta

Stocks finished in the green for the fourth straight day on Jan 18 following media reports which suggested that U.S.-China trade relations were set to improve. The resulting optimism helped to outweigh concerns emanating from the government shutdown and mixed fourth-quarter earnings numbers.

Recently, both sides have been making optimistic comments which suggest that a deal could be reached soon to end this long-running dispute. Technology, materials and industrial stocks are likely to benefit the most from such an agreement. Adding stocks from these sectors to your portfolio looks like a smart choice.

China Offers to Hike U.S. Imports, Says Bloomberg

The major catalyst to Friday’s gains was a report from Bloomberg, per which China is looking to raise its U.S. imports by $1 trillion. The escalation, which is likely to take place over the next six years, would eliminate the U.S.-China trade deficit completely by 2024. Last year, China’s trade surplus with the United States came in at $323 billion.

The report goes on to state that this offer was made during trade talks with Beijing in December. U.S. officials expressed their doubts about the offer and asked China to erase the misbalance completely over the next two years. Economists also think a complete elimination of trade surplus is hard to achieve.

However, other market watchers believe that China could achieve this target by creating a trade surplus with other trading partners. This could intensify the imbalance with other partners, but China would end up buying more U.S. products, including cars, aircraft and soybeans. 

Trump Exudes Optimism About Trade Deal

On Jan 19, U.S. President Donald Trump exuded optimism about chances of a trade deal with China, indicating significant progress had taken place on this front. His comments follow discussions between top officials from both sides which took place in Beijing earlier this month.

According to Trump, a trade agreement “could very well happen” following an “extraordinary number of meetings.” However, he brushed aside reports that his administration was looking to remove tariffs on China imports.

At the same time, the fact that his comments come ahead of Chinese vice-premier Liu He’s visit to Washington later this month, provides cause for optimism. He is scheduled to meet U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer for high level discussions.

Last week, a spokesperson of China’s foreign ministry recently stated that both the United States and China were “making positive efforts” to seal a deal which could be “mutually beneficial.” The spokesperson was reacting to a query about Liu’s upcoming trip to the United States. 

Our Choices

Recent media reports seem to suggest that both the United States and China are keen to end their long-running trade dispute. President Trump also continues to make optimistic comments about this issue. With another round of trade talks scheduled for later this month, a resolution to this dispute seems to be in sight.

Technology, materials and industrials stocks will likely gain the most from this development. This is why it makes sense to pick up select stocks from these sectors at this time. However, picking winning stocks may be difficult.

This is where our VGM Score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score. 

We have narrowed down our search to the following stocks based on a good Zacks Rank and VGM Score.

Marvell Technology Group Ltd. MRVL is a fabless designer, developer and marketer of analog, mixed-signal and digital signal processing integrated circuits.

Marvell Technology carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. The company has expected earnings growth of 4.8% for the current year.

Sealed Air Corporation SEE is a global leader in food safety and security and product protection.

Sealed Air has a VGM Score of B. The company’s expected earnings growth for the current year is 11%. The Zacks Consensus Estimate for the current year has improved by 0.3% over the last 30 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intel Corporation INTC is the world’s largest manufacturer of semiconductor products.

Intel has a Zacks Rank #2 (Buy) and VGM Score of A. The company has expected earnings growth of 0.3% for the current year.

Deere & Company DE is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide.

Deere carries a Zacks Rank #2 and has a VGM Score of A. The company has expected earnings growth of 21.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 days.

The Mosaic Company MOS is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry.

The Mosaic Company carries a Zacks Rank #2 and has a VGM Score of A. The company has expected earnings growth of 24% for the current year. The Zacks Consensus Estimate for the current year has improved by 2.4% over the last 30 days.

Intrepid Potash, Inc. IPI is the largest producer of potash in the United States and is dedicated to the production and marketing of potash and langbeinite, another mineral containing potassium.

Intrepid Potash carries a Zacks Rank #2 and has a VGM Score of A. For the current year, the company has expected earnings growth of more than 100%. The Zacks Consensus Estimate for the current year has improved by 7.8% over the last 30 days.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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