U.S.-China trade issues are showing no signs of abatement. The White House is now considering banning U.S. investments in China. And the Trump administrations’ move to block all American investments in China is sure to aggravate the trade dispute between two of the world’s largest economies.
Even though the discussions are at an early stage, such an action could affect financial markets and affect billions of dollars of investments. Fundamental issues related to China’s approach toward intellectual property rights are yet to be addressed, and President Trump is unlikely to go soft on China ahead of the 2020 elections. Trump had accused China of manipulating its currency and stealing intellectual property, in a U.N. speech.
The Trump administration, by the way, is considering options such as delisting Chinese companies from U.S. stock exchanges. Shares of Alibaba, in particular, had its worst day since May on Sep 27. Other Chinese stocks like JD.com and Baidu also traded lower.
The U.S. plan to ban China investment has completely overshadowed the progressive trade talks that happened some time back. The countries had agreed to maintain communication and had discussed the details of their next round of trade talks in October. What’s more, the U.S. Trade Representative’s office had confirmed that the talks with China had been “productive.” China’s Commerce Ministry added that the talks were “constructive.”
And how can we forget, Beijing had lifted tariffs on some U.S. products amid trade tensions. As a show of goodwill, Trump reciprocated by announcing a delay in implementation of higher tariffs on $250 billion of Chinese goods. Trump tweeted that tariff hikes from 25% to 30% will now go into effect on Oct 15, rather than the previously scheduled Oct 1.
Invest in Domestic Producers on Renewed Trade Concerns
Nonetheless, as uncertainty over the outcome of the Sino-American trade deal rises, investors should target tariff-proof stocks that stand to gain from an all-out trade war.
Among such companies are domestic producers of goods. Due to their limited international exposure, they offer higher protection than their large- and mid-cap counterparts against any economic upheaval. After all, trade issues do affect the economy and squeeze corporate profits. These stocks also have solid growth narratives as their promising outlook remains unfazed by the change in tariffs.
We have, thus, selected five such stocks that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Barrett Business Services, Inc. BBSI provides business management solutions for small and mid-sized companies in the United States. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has increased 0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 11% compared with the Outsourcing industry’s projected rally of 3.3%. The company has outperformed the broader industry so far this year (+54.3% vs +23.6%).
Hibbett Sports, Inc. HIBB engages in the retail of athletic-inspired fashion products through stores. Its stores offer a range of merchandise, including athletic footwear, athletic and fashion apparel, sports equipment, and related accessories. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 3.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 24.3% against the Retail - Miscellaneous industry’s projected decline of 4.8%. The company has outperformed the broader industry so far this year (+60.2% vs -3.4%).
Construction Partners, Inc. ROAD, an infrastructure and road construction company, provides construction products and services to public and private sectors. It constructs highways, roads, bridges, and airports. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its next-year earnings has increased 2.4% over the past 60 days. The company’s expected earnings growth rate for the next quarter is more than 100% compared with the Building Products - Miscellaneous industry’s projected rally of 19.3%. The company has outperformed the broader industry so far this year (+72.7% vs +31.9%). You can see the complete list of today’s Zacks #1 Rank stocks here.
Agile Therapeutics, Inc. AGRX, a women's healthcare company, focuses on the development and commercialization of prescription contraceptive products for women. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 27% over the past 60 days. The company, which is part of the Medical - Generic Drugs industry, is expected to record earnings growth rate of 27.3% in the next quarter. The company has outperformed the broader industry so far this year (+94.5% vs -7.2%).
Boot Barn Holdings, Inc. BOOT, a lifestyle retail chain, operates specialty retail stores in the United States. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 1.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 23.7% compared with the Retail - Apparel and Shoes industry’s projected rally of 2.7%. The company has outperformed the broader industry so far this year (+104.0% vs -23.7%).
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