24/7 Wall St.

While economic growth in the United States has slowed, the reality is that growth has been better than in China coming into 2019. China’s economy officially is still growing faster than the U.S. economy, but China needs to have much more rapid growth to keep creating the millions of new jobs each year needed. It has become more obvious that China actually has more to lose in the world of trade wars and tariffs than the United States does.

The international trade deficits in actual goods prove that point: China exported $375 billion more in goods to the United States than the United States shipped to China in 2017, and the most current data showed that deficit figure was already $344 billion in the first 10 months of 2018 alone.

As China’s economic numbers continue to tank, U.S. investors are looking for companies with little to no exposure to how fast China’s economic growth rate is coming down. This does not imply that a business might not have exposure from Chinese suppliers in some cases, and it has grown increasingly difficult to find companies that have no supplier risks from China. Technology, apparel and household goods have become prime examples of where there is too much exposure to China in sales and supplier-risk to ever count as 100% domestic.

24/7 Wall St. has identified 10 companies with large market capitalizations and billions of dollars in revenues that should have little to no direct worries about how China’s economic readings come out. That said, it is a global economy, whether there are trade wars or not, and very few companies have stocks that will be considered great ones if the market as a whole slides 10%, 15% or more as a result of a slower global economy.

American Electric Power Co. Inc. (NYSE: AEP) is not the largest U.S. electric utility, but its 5.4 million U.S. customers are considered to be mostly in-land in the middle of the United States. For all practical purposes, its China exposure is nonexistent. American Electric Power has a $36 billion market cap.

American Water Works Co. Inc. (NYSE: AWK) is the king of water utilities in America and has some minor exposure to Canada. That said, it serves 15 million people with a presence in 46 states with zero known exposure to China. It has a $16 billion market cap and is considered to be one of the most defensive investments for investors during any period of economic uncertainty.

Chipotle Mexican Grill Inc. (NYSE: CMG) has recovered handily from its woes about making customers sick, and the Mexican casual diner has effectively zero exposure to China. Chipotle’s most recent earnings showed more than 2,400 restaurant locations with only 37 international stores, located in Canada, France, Germany and the United Kingdom. Its market cap is $14 billion.

Crown Castle International Corp. (NYSE: CCI) has become a real estate investment trust (REIT) covering cell and data tower communications locations across the United States. If you use a cellphone or wireless device in any city, chances are almost 100% that your call went through one of their towers, among other tower owners contracted by your telecom carrier. Its exposure to China is basically nonexistent. The words “China,” “Asia” and “Chinese” were not ever mentioned in the basic materials of the more than 100 pages making up Crown Castle’s 2017 annual report. Its market cap was $44 billion on last look.

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Northrop Grumman Corp. (NYSE: NOC) is among the world’s largest and most dominant defense contractors. The company does most of its business with the U.S. government (Department of Defense and intelligence units, 85% of total 2017 sales) and also with foreign, state and local governments and with commercial customers. While any defense firm has ultimate exposure to China, the company may be a winner if escalations heated up further arms races (against Russia and China) and it should have little to no real revenues originating from China to speak of. Northrop Grumman’s market cap was $45 billion, and it was expected to have $30 billion in 2018 sales.

Sirius XM Holdings Inc. (NASDAQ: SIRI) has become a more complex structure in recent years under Liberty, and its business model may be changing strides after its acquisition of Pandora. That said, its operations are almost entirely in North America for the time being. The company was punished after weaker guidance in 2019 growth expectations, but this had nothing to do with China. Its market cap is $26 billion, and the company’s standalone revenues were projected to be around $5.75 billion in 2018.

Southwest Airlines Co. (NYSE: LUV) may have expanded its discounted operations to Mexico and the Caribbean in recent years, and the airline might have more growth ambitions in the years ahead, but this is still considered to be a domestic air carrier and is among the best run in the industry. Southwest has a market cap of $27 billion that dominates U.S. and international air carriers alike.

UnitedHealth Group Inc. (NYSE: UNH) generally is considered to be the largest U.S. health insurance provider, covering tens of millions of Americans with health and ancillary insurance products. It may have companies as clients who do business in China and its clients may even have offices in China, but only three of its hundreds of subsidiaries are in China, and its annual report noted that any of the endless amounts of subsidiaries would be constituted as a significant subsidiary. UnitedHealth listed six subsidiaries in India, and its Asian exposure serves more than a million people in India but exponentially larger numbers in the United States, the United Kingdom and Brazil. Its market cap was almost $240 billion.

Valero Energy Corp. (NYSE: VLO) is a top refiner with related activities in the United States and a few international places, but no direct exposure to China for its operations as a whole. In the 2017 annual report, Valero did include “Asia,” along with the other continents and regions outside of North America, but its ability to get crude oil to refine should not face any serious disruptions based on China’s economy. Where its refined products end up is based on contracts and on international markets, and the end products are in large fungible global markets. Valero’s market cap was $33 billion.

Verizon Communications Inc. (NYSE: VZ) is one of the few Dow Jones industrial stocks that can claim to have little to no worries about how things are going in China’s economy. There may be some underlying risks with technology suppliers if the tariff issues are not resolved, but many companies have been reworking efforts to avoid those tariffs in the years ahead, if tariffs become a large issue again. Verizon now owns AOL and Yahoo under its Oath platform, but these are rather small in the overall picture and the exposure to Chinese economic growth is believed to be very little. Verizon’s market cap was almost $240 billion in mid-January, and it was expected to have posted close to $131 billion in annual sales in 2018.