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.
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.