Investors worried about a potential trade war should look at buying shares of Boeing and Raytheon, among other companies, as their trade war exposure is low, according to Fundstrat Global Advisors' Tom Lee.
Boeing and Raytheon's trade war exposure is 35.2 percent each, Fundstrat's founder and head of research said in a note to clients Friday. Steel producer Nucor has the least amount of trade war exposure of the companies listed by Lee, with just a 15 percent exposure.
To determine their exposure to a trade war, Lee looked at their overseas sourcing as a percentage of cost of goods sold and their exports as a percentage of sales. If the sum of the two percentages totaled less than 40 percent, then the company had low exposure to a trade war.
Below is a list of five stocks with low trade war exposure highlighted by Lee, including Raytheon, Nucor and Boeing.
President Donald Trump announced Thursday the U.S. will set tariffs of 25 percent for steel imports and 10 percent for aluminum imports as early as next week. The move was condemned by world leaders and sent global markets tumbling amid fears of a potential trade war.
Asian stocks closed broadly lower overnight, while European markets also fell sharply. In the U.S., the S&P 500 was headed for its fourth straight 1 percent decline.
But Lee thinks the move lower is an overreaction to the news, noting: "We are buyers of this pullback. The equity environment is more challenging than 2017, and as noted above, is characterized by greater skepticism of Washington (deficits, tax cuts, etc), synchronized normalization by central banks and inflation increases—however, we view these as healthy transitions and supportive of earnings growth."