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6 Top US-Focused Stocks to Buy As Trade Tensions Intensify

Swarup Gupta

On May 6, key Trump administration officials raised trade tensions by claiming that China was backtracking from commitments made during the early rounds of negotiations. They indicated that the U.S. President was ready to continue the conflict in order to extract crucial concessions from authorities in Beijing.

Trouble on the trade front was brewing from May 5 when President Trump tweeted that he was preparing to raise tariffs on China. Trump claimed that this had become necessary since Beijing was looking to renege on earlier promises.

Though another round of trade negotiations will still take place this week, it is unlikely that a deal will concluded by May 10 or any time soon. Against this backdrop, investing in U.S.-focused real estate investment trusts (REITs), homebuilders and regional banks looks like a smart option.

Lighthizer, Mnuchin Raise Trade War Pitch

On Monday, U.S. Trade Representative Robert Lighthizer said that trade negotiations were “moving backwards instead of forwards” which was unacceptable according to President Trump. Lighthizer claimed that “an erosion in commitments” was visible on the part of China.

His views were echoed by Treasury Secretary Steven Mnuchin, who claimed that the Trump administration had learnt over the weekend that China was “trying to go back on some of the language” that had been agreed upon during previous rounds of negotiations.

These key members of the Trump administration announced that tariffs on Chinese goods worth $200 billion will be raised from 10% to 25% on May 10. Mnuchin claimed: “There’s no question that some of the trade policies helped in the G.D.P. number,” referring to the strong first-quarter GDP read-out.  

Trump Tweets Raise Alarm, Near-Term Deal Unlikely

The ongoing U.S.-China trade conflict had taken a turn for the worse following tweets made by President Trump on Sunday. Accusing China on backtracking from earlier commitments, Trump said tariffs would be raised on $200 billion of the country’s imports on May 10.

Trump also threatened to impose a 25% import duty on $325 billion worth of Chinese goods. The U.S. President claimed that such tariffs “have had little impact on product cost, mostly borne by China.” Trump has been accused of going soft on China and his team seems to think that it is best to raise the protectionist ante ahead of his 2020 reelection bid.

Trump’s tweets have also made a near-term trade agreement politically unviable for China’s government. Sealing a deal ahead of the May 10 deadline would be viewed as an act of capitulation by the Chinese populace. Beijing has also been unwilling to change its state-guided economy drastically even though this has emerged as a key sticking point during negotiations.

Our Choices

Comments from President Trump and key officials from his administration indicate that the United States is prepared to prolong the U.S.-China trade conflict. Their adversarial stance has also made it politically unfeasible for China to agree to a near-term trade deal. It is now amply clear that a trade war which has wrecked multinational stocks, particularly tech and industrials, is far from over.

Investing in stocks of homebuilders, regional banks and REITs with a domestic focus would be prudent in such an environment. They would likely provide better returns compared to their peers with higher overseas exposure. 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, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM Score. You can see the complete list of today’s Zacks #1 Rank stocks here.

Plymouth Industrial REIT, Inc. PLYM is a full service, vertically integrated REIT company.

Plymouth Industrial REIT has a VGM Score of A. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for the current year has improved by 59.9% over the last 60 days.

Ashford Hospitality Trust, Inc. AHT is an REIT focusing on investing in the hospitality industry.

Ashford Hospitality has a VGM Score of B. The company’s projected growth rate for the current year is 3.6%. The Zacks Consensus Estimate for the current year has improved by 9.3% over the last 30 days. 

First Business Financial Services, Inc. FBIZ is the bank holding company for First Business Bank which offers a range of banking products and services.

First Business has a VGM Score of B. The company’s projected growth rate for the current year is 19.2%. The Zacks Consensus Estimate for the current year has improved by 8.1% over the last 30 days.

SB One Bancorp SBBX is the bank holding company for SB One Bank, which offers a variety of banking products and services.

SB One Bancorp has a VGM Score of B. The company’s expected earnings growth for the current year is 35.8%. The Zacks Consensus Estimate for the current year has improved by 8.8% over the last 30 days. 

NVR, Inc. NVR is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings.

NVR has a VGM Score of B. The company’s expected earnings growth for the current year is 1.8%. The Zacks Consensus Estimate for the current year has improved by 12.2% over the last 30 days. 

PulteGroup Inc. PHM engages in the homebuilding and financial services businesses primarily in the United States.

PulteGroup has a VGM Score of B. The Zacks Consensus Estimate for the current year has improved by 9.4% over the last 30 days. 

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First Business Financial Services, Inc. (FBIZ) : Free Stock Analysis Report
 
SB ONE BANCORP (SBBX) : Free Stock Analysis Report
 
NVR, Inc. (NVR) : Free Stock Analysis Report
 
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