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U.S., China Move Closer to Trade Deal: 6 Winners

Swarup Gupta
AbbVie (ABBV) closed at $78.45 in the latest trading session, marking a -0.42% move from the prior day.

On Feb 24, President Trump said he has decided to delay additional tariffs on Chinese goods that were to come into effect from Mar 1. Trump said significant progress was made during last week’s negotiations. He also stated that a meeting between him and President Xi was likely before the end of March. 

U.S. markets have been on a tear this year and optimism over a trade deal has been a major factor responsible for these gains. Now, analysts feel that a trade agreement could boost stocks even higher.

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.

Trump Delays March’s Additional Tariffs

On Sunday, President Trump tweeted that “substantial progress” was made during last week’s trade negotiations. The issues covered during these talks include key U.S. concerns such as technology transfer and intellectual property.

Following such productive discussions, Trump has decided to defer the additional tariffs that were set to be levied on Chinese imports from Mar 1. The extension of the March deadline puts a freeze on the step up in tariffs from the existing rate of 10% to 25% on $200 billion of additional imports from China.

Further, the U.S. President is set to meet his Chinese counterpart at Mar-a-Lago, Florida to seal a long-lasting trade deal. According to CNBC, sources revealed that the meeting was set to take place late next month. Trump followed up his tweets by stating at a White House event that “very big news” is likely over the next two weeks if trade talks are successful.

Key Sticking Points Likely to be Resolved

According to Reuters, negotiators had found significant common ground on several issues by Saturday. This includes market access, intellectual property rights and the massive trade deficit the United States has with China. Recently, China promised to increase its uptake of U.S. goods to $1.2 trillion.

However, major differences of opinion on China’s subsidies, cyber theft, public sector enterprises and so called forcible technology transfers continued to linger at that point. What remained particularly elusive was a common ground on a mutual enforcement mechanism.

But Trump’s comments on Sunday indicated that both sides were keen to press ahead, regardless of what differences remain. Various news agencies were quoting unnamed sources to indicate that both the United States and China have started formulating the broad contours of a long-lasting trade deal.

Our Choices

Fresh comments from President Trump indicate that the United States and China are closer than ever to a long-lasting trade agreement. A deal may be struck before the end of March, bringing to an end months of tension for investors across the world. Indexes are set to move higher after such an agreement, per analysts and market watchers.

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.

Synaptics Incorporated SYNA is a leader in designing and marketing human interface solutions for electronic devices.

Synaptics has a Zacks Rank #1 (Strong Buy) and VGM Score of A. The company has expected earnings growth of 15.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.9% over the past 30 days.

Unisys Corporation UIS is an IT firm, specializing in securing client operations, increasing efficiency of data centers, enhancing support to their end users and constituents and modernizing their enterprise applications.

Unisys has VGM Score of B. The Zacks Consensus Estimate for the current year has improved by 3% over the past 30 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arch Coal, Inc. ARCH produces metallurgical and thermal coal, used to manufacture steel and generate electricity.

Arch Coal has a Zacks Rank #2 (Buy) and VGM Score of A. The Zacks Consensus Estimate for the current year has improved by 9.5% over the past 30 days.

W. R. Grace & Co. GRA produces specialty chemicals.

W. R. Grace has a Zacks Rank #2 and VGM Score of B. The company has expected earnings growth of 10.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.2% over the past 30 days.

Dover Corporation DOV is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment.

Dover Corp has a Zacks Rank #2 and VGM Score of B. The company has expected earnings growth of 15.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 1.8% over the past 30 days.

DXP Enterprises, Inc. DXPE is a leading products and services distributor to energy and industrial companies in the United States.

DXP Enterprises has a Zacks Rank #2 and VGM Score of B. The company has expected earnings growth of 33.5% for the current year.

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