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What Trade/Antitrust Issues? 5 Top Stocks in Fine Fettle

Sanghamitra Saha

The tech space has been through a rough patch in the past month. First, escalation in U.S.-China trade tensions and now regulatory fears have dealt a blow to the space. The broader tech ETF Technology Select Sector SPDR Fund XLK is down 9.7% in a month's time (as of Jun 4, 2019).

It all started with the Trump administration raising tariffs on $200-billion worth of Chinese goods from 10% to 25% on May 10 and China announcing a retaliatory move —- a tariff hike on $60-billion worth of American goods to 25%, starting Jun 1.

President Donald Trump is considering additional tariffs on an incremental $325 billion of Chinese imports. Not only this, Washington has U.S. firms from doing business with the Chinese giant Huawei, citing national security concerns.

On May 23, the U.S. Commerce Department stated that it was proposing a new rule to implement anti-subsidy duties on products from countries that undervalue their currencies against the U.S. dollar, another move that could undermine the Chinese trade. Trump administration also intensified trade tensions with Mexico at the end of the month.

Technology Stocks: A Key Risky Area

Tech companies, specifically semiconductors and tech hardware and equipment, are exposed the most to this trade war. This is because rising tariffs will make the products of tech giants like Apple and other American biggies costlier to manufacture. This, in turn, will likely compel hardware manufacturers to hike prices at home, while duties on finished goods being exported to China could also make the products expensive for buyers in that country, per techcrunch.com.

Going by the Morgan Stanley equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 52%” and are thus prone to maximum hazards on the heightening trade stress. Tech Hardware & Equipment companies have about 14% exposure to China.

If this was not enough, the tech space started June on a weak note with the U.S. government is planning to grill a host of big companies in the industry with antitrust and business practice probes. Shares of tech giants like Alphabet (GOOGL) (down 6.1%), Amazon (AMZN) (down 4.6%), Facebook (FB) (down 7.5%) and Apple (AAPL) (down 1%) were hard hit.

Against this backdrop, below we highlight a few tech stocks that have gained more than 2% in the past month. These stocks have a favorable rank and VGM Score.

Stock Picks

PC-Tel Inc. PCTI – Up 9.2% past month   

The Zacks Rank #1 (Strong Buy) company PCTEL designs, develops and delivers wireless solutions. PCTEL's products include wireless local area network software products that simplify installation, roaming, Internet access and billing. It has a VGM Score of Band it belongs to a top-ranked Zacks industry (top 5%).

Amdocs Limited DOX – Up 7.6% past month      

The Zacks Rank #2 (Buy) company is a leading provider of customer care, billing and order management systems for communications and Internet service. It has a VGM Score of A and belongs to a top-ranked Zacks industry (top 32%).

Harris Corporation HRS – Up 5.0%

Zacks Rank #2 Harris Corporation is a leading technology innovator, solving customers' toughest mission-critical challenges by providing solutions that connect, inform and protect. It has a VGM Score of B and comes from a top-ranked Zacks industry (top 5%).

Altice USA Inc. ATUS – Up 4.7%

The Zacks Rank #2 company is a broadband communications and video services provider primarily in the United States. It has a top VGM Score of A and hails from a top-ranked Zacks industry (top 39%).

OSI Systems Inc. OSIS – Up 2.9%

The Zacks Rank #1 company is a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications in the homeland security, healthcare, defense and aerospace industries. It has a VGM Score of B and it comes from a top-ranked Zacks sector (top 44%).

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