Trade tensions are showing no signs of easing, but that's not stopping analysts from finding hidden gems to bolster your portfolio. While the U.S. and China continue their back and forth analysts say there are plenty of ways to invest.
CNBC examined the most recent Wall Street research to find stocks to invest in and around the ongoing trade battle. Companies with buy ratings include Best Buy, Fabrinet, Big Lots, Zebra Technologies, Dover Corporation and Cabot.
The tariff battle has certainly taken its toll on the markets. Since President Donald Trump's May 5th tweet storm the Dow Jones Industrial Average and S&P 500 are both down over 6%. The sell-off deepened on Friday after Trump threatened to slap a 5% tariff on all Mexican imports.
When Best Buy reported second quarter earnings last week, analysts were squarely focused on the impact that tariffs would have on the electronics retailer. The retail sector has had many analysts on edge due to the sector's broad exposure to tariffs.
Not only did the company report a solid quarter but analysts at Raymond James said the tariff impact was "minimal" -- for now. "The key risk in the near-term, however, is what items could potentially be on a new list of ~ $100 billion in tariffs that be could be announced in June or July," they wrote. The firm maintained their strong buy on the stock.
Shares of Best Buy are down 3.74% on the week.
Big Lots reported better-than-expected earnings on Friday and raised its guidance. The discount retailer has also been caught up in the tariff war with the stock down 25% this month.
"In our view, this presents a particularly attractive buying opportunity," Bank of America said. The analyst is also bullish on the discount retailer's "underappreciated transformation opportunity with its 'store of the future' remodel program."
One analyst recently heard something which surprised him during a recent investor conference. The CEO of Dover Corporation went out of his way to say that his company was actually benefiting from the tariff battle, according to analysts at Gordon Haskett.
"This is the only company we have heard in the multi-industry space to call this out," analyst John Inch said of Dover, which manufactures industrial products.
"Dover has been winning more business as Chinese products have become more expensive – primarily component type products (product example: pumps) – and as North American companies have been looking for alternate suppliers (to China). Dover is not significantly that exposed (directly) to Chinese tariffs as it is leveraged toward domestic production," Inch told CNBC.
Dover is down 1.03% on the week
Here are buying opportunities amidst the U.S.-China trade war:
Raymond James- Best Buy - Strong buy rating
"Current Tariff Impact Is Minimal. The key risk in the near-term, however, is what items could potentially be on a new list of ~ $100 billion in tariffs (List 4) that be could be announced in June or July. Management says they are having active conversations with the Trump administration in order to eliminate as many consumer products as possible on the list — minimizing the headwind for consumers."
Needham- Fabrinet, Buy rating
"While it seems unlikely that China and the U.S. will strike a deal anytime soon, we think one will be reached at some point. We note the ZTE ban only lasted 3 months. We think the Huawei ban could easily stretch out at least twice this length, but that a deal will occur at some juncture and the trade war will conclude. We think it highly probable that Huawei will be included in any final settlement. Under this scenario we expect to restore our Fabrinet estimate cuts and see the stock vault higher."
Bank of America- Big Lots, Buy rating
"We estimate that if 25% tariffs were placed on all products imported from China and BIG was able to share this cost equally with its suppliers, it would reduce our 2020 EPS estimate by 36%, holding all else equal. BIG's stock price has declined 29% in the past month (vs. S&P 500 -4%) which suggests that the potential impact from tariffs has already been reflected in the stock price. In our view, this presents a particularly attractive buying opportunity. We maintain our Buy rating given BIG's underappreciated transformation opportunity with its "store of the future" remodel program."
Baird- Zebra Technologies, Outperform rating
"Recently, investors' top near-term concerns focused on implications for ZBRA if U.S. implements List 4 tariffs. ZBRA recently commented on List 4 tariffs and potential action plan in its investor slides. To date, U.S. tariffs (List 1-3) have had a marginal impact on ZBRA, which the company has been able to countermeasure/absorb without noticeably impacting financials or demand. However, a "List 4" potentially poses a larger challenge/requires more action given ZBRA manufactures a substantially greater percentage of product in China that would be likely subject to List 4 (than List 1-3)."
Gordon Haskett- Dover Corporation, Buy rating
"Since Dover presented at EPG last Wed (5/22), the company's shares have sold off just over 4% despite Dover having offered up one of the best presentations of the conference, in our opinion. CEO Rich Tobin (who didn't filibuster from a canned presentation but instead went straight to Q&A) offered several positive catalysts, including calling out an additional ~$50mm in SG&A cost savings (25-30 cents in EPS) from streamlining initiatives while reporting the M&A pipeline to be relatively full. Tobin also noted that the company is actually benefiting from tariffs – the only company we have heard in the multi-industry space to call this out. Overall, we continue to view Dover to be one of the best multi-industry self-help investment opportunities, characterized by substantial margin runway and future M&A contribution ahead."
Loop Capital- Cabot Corporation, Buy rating
"With this report we are adjusting our estimates on Cabot Corp. lower, to reflect the company's recent quarterly earnings results, as well as the downward guidance revision that accompanied CBT's F2Q release. Although disappointing, the guidance reduction may not have been all that surprising, considering underwhelming trends conveyed by numerous other players across the broader Polymers industry, reflecting direct or indirect exposure to key China and/or European automotive end markets, where pronounced weakness was pretty apparent. More specifically, Cabot's results were impacted by a downdraft in spot carbon black pricing in China, weak demand (including plastics industry channel destocking) and diminished margins in its Specialty Carbons business, and owing to some adverse feedstock differentials during the quarter. .. .We are reducing our price target on CBT from $77 to $69, but given the stock's cheap valuation, even on reduced estimates, we are sticking with our Buy rating. Evidence of a resolution on trade with China and/or economic recovery in China, more generally, would likely serve as a positive catalyst, and give us greater conviction. We still see CBT as undervalued."