Investing

10 Stocks to Own If Full-Scale Trade War With China Breaks Out

Jon C. Ogg

Published: May 9, 2019 5:15 pm

Last Updated: January 30, 2020 8:58 pm

By now there are likely no people anywhere in the world who have not heard that President Donald Trump’s administration has set a deadline of this Friday to increase tariffs on $200 billion in Chinese goods coming into America. And more tariffs may be expanded to cover even more goods if no trade agreement is reached. The move is after China backpedaled away from its points of negotiations that have been going on since late in 2018.

The thought that a trade war would escalate has spooked the financial markets. After all, no one really wins in a trade war. And China has vowed to retaliate if tariffs are made. Still, China’s major equity indexes and ETFs tracking local Chinese stocks have been hit much harder than the American indexes and ETFs that track our local indexes. While no one would dare claim that a trade war will not have any impact on the American economy as a whole, many investors and economists believe that companies with an American focus on goods and services will hold up well if they do not a material amount of business that is done in China.

Investors are often an opportunistic bunch when you think about. What might be bad news for the overall economy may create some rather interesting fallout in the various sectors and segments that make up the broader economy. And it turns out that some companies might even be deemed as de facto winners during a trade war with China.

24/7 Wall St. has identified 10 companies that have little to no direct exposure when it comes to selling its goods and services into China. Some companies may have other risks and might have other exposure to nations that do business with China. Companies with the bulk of their goods supplied by China have also been mostly eliminated.

While it is impossible to say that there are any companies that can be 100% isolated by any full-scale trade war, these are ten mostly American companies that would be considered to be safe from the threats of China.

We have included the performance of each company year-to-date in 2019, a basic description of each company, and how the current share price matches up against the Refinitiv consensus analyst price target and each stock’s range over the last year. These companies have been listed alphabetically except for one.

American Electric Power:  Up 12% YTD

American Electric Power Company Inc. (NYSE: AEP) is about as American as you can get, with its name and with its targeted footprint for offering electric utility services. It claims to have more than five million customers and it serves 11 mostly central states (Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia). Being a utility means that it has source parts and materials from all over the world, but being a power utility is generally considered to be about as defensive as it gets.

American Electric Power shares closed at $82.87, with a 52-week range of $62.71 to $86.10. The stock has a consensus analyst price target of $85.06.

American Water Works:  Up 16% YTD

American Water Works Co. (NYSE: AWK) is America’s largest and most diversified water utility provider. It has operations in most American states and a small exposure to Canada, but its millions of water users are not based in China. Where it has to source materials from could always crimp the argument in some ways, but water is generally considered to be the most defensive market segment you can imagine.

American Water Works shares closed up 0.4% at $106.25, with a 52-week range of $77.73 to $108.32. The stock has a consensus analyst price target of $109.83.

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Chipotle:  Up 64% YTD

Chipotle Mexican Grill, Inc. (NYSE: CMG) is a U.S. dominated story with limited exposure outside of the United States. Even after pulling back from highs, it may be considering lofty and well beyond the first half of its turnaround after scandals that made customers sick. Chipotle has a lot of room to expand in the United States, and keeping its cleaner-food image with its domestic food supply chain requirements might simply be impossible in a nation like China.

Chipotle shares closed down 0.7% at $704.95, with a 52-week range of $383.20 to $721.42. The stock has a consensus analyst price target of $683.00.

Facebook: Up 44% YTD

Facebook Inc. (NASDAQ: FB) has effectively been closed out of China for years. That said, the company has international exposure in most other nations and there is more than enough evidence to show that Mark Zuckerberg would love to start having people in China become Facebook addicts who waste as much time as Westerners do on social media.

Facebook shares closed down 0.5% at $188.65, with a 52-week range of $123.02 to $218.62. The stock has a consensus analyst price target of $221.50.

Home Depot: Up 13% YTD

The Home Depot Inc. (NYSE: HD) had 2,287 Home Depot stores located in the U.S., Puerto Rico, U.S. Virgin Islands, Guam, Canada, and Mexico on last look. No stores in China. That could change in the years ahead, but no China sales as of now. That said, many of the products that Home Depot sells are either sourced from or may be manufactured in China. That is unfortunately unavoidable in retail.

Home Depot shares closed at $194.55, with a 52-week range of $158.09 to $215.43. The stock has a consensus analyst price target of $206.07.

Southwest Air:  Up 12% YTD

Southwest Airlines Co. (NYSE: LUV) may be in a range-bound stock pattern. It may have exposure tied to the grounding of the Boeing 737 MAX plane grounding. And it may have recently expanded internationally. That said, Southwest has no flights that go to China nor anywhere close to it. If there is a Southwest Air flight in China, it’s either a stunt or a pilot is seriously lost.

Southwest Airlines shares closed at $52.46, with a 52-week range of $44.28 to $64.02. The stock has a consensus analyst price target of $59.47.

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UnitedHealth: Down 4% YTD

UnitedHealth Group Inc. (NYSE: UNH) is the leader when it comes to insuring America for its health coverage. it’s now a Dow component, and while it has international exposure of 6.2 million clients in Latin America and what is said to be 130 additional countries. That said, there is really not much in China that it has to worry about and “China” does not show up once in its entire 98-page annual report.

UnitedHealth shares closed down 0.5% at $238.03, with a 52-week range of $208.07 to $287.94. The stock has a consensus analyst price target of $288.04.

Verizon:  Up 0.3% YTD

Verizon Communications Inc. (NYSE: VZ) may have recently acquired AOL and Yahoo! for broader web exposure, but by and large its targets is the world of wireless telecom in North America.

Verizon shares closed at $56.47, with a 52-week range of $46.52 to $61.58. The stock has a consensus analyst price target of $59.64.

Wells Fargo: Up 2% YTD

Wells Fargo & Co. (NYSE: WFC) has been considered to be the largest mortgage underwriter in America, and despite having its magic account opening scandal on millions of customers the company remains firmly focused on North American banking and brokerage clients. It does a relatively small amount of trading internationally compared to most of the large money center banks. While the 2018 annual report from Wells Fargo indicated roughly 200,000 square feet of office space in China, that is a tiny portion of its 4 million square feet of office space in its entire international locations; and Wells Fargo had over 85 million square feet of office space in the United States.

Wells Fargo shares closed up 0.4% at $46.74, with a 52-week range of $43.02 to $59.53. The stock has a consensus analyst price target of $52.12.

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Altria: up 5.2% YTD

Altria Group Inc. (NYSE: MO) is the domestic tobacco play now that Philip Morris International has been spun out. The primary business remains tobacco sold in America. It has some exposure to China via investments in other companies within wine and related tobacco areas, and Altria is moving further into vaping and cannabis. That said, for now the focus is still the U.S. even if it hard to say that Altria is a good buy just because of no major China exposure. After all, its products do kill more people than guns by a wide margin.

Altria shares closed up 10-cents at $51.97, with a 52-week range of $42.40 to $66.04. The stock has a consensus analyst price target of $58.73.