Tags: barrons | stocks | trade | war

Barron's: 5 Cheap Stocks to Ride Out the Trade War

Barron's: 5 Cheap Stocks to Ride Out the Trade War
(Florin Seitan/Dreamstime)

Tuesday, 21 May 2019 09:06 AM

Barron’s recently told investors shopping for stocks that they are better off simply favoring cheap ones with decent long-term growth prospects than reacting to each new development on tariffs and other fleeting factors.

“For investors looking to put money to work, another question is whether cheapness is still a desirable attribute in stocks. Growth stocks have outperformed value stocks for so long that value investing appears broken. One reason is that the world has never seen companies so large growing so fast as now,” Barron’s explained.

Even so, the underperformance of value stocks has left them more attractive than usual, asset manager GMO noted in an analysis this week. By its math, value stocks in recent decades have traded at an average discount to the broad market of 24%, but now can be had at a discount of 31%.

Here is the handful of stocks suggested by Barron’s: 

  • Applied Materials / AMAT 
  • BorgWarner / BWA 36.26   
  • Charles Schwab / SCHW     
  • Regeneron Pharmaceuticals / REGN
  • Tapestry / TPR 

Meanwhile, JPMorgan Chase & Co. recently said the traditional investment hedges of gold and the yen are also poised to become a safe bet for shelter in the economic storm, Bloomberg explained.

A combination of a Federal Reserve that has stopped tightening policy and investor positioning that suggests the two assets are under-owned, could see their performance as hedges improve in 2019 and 2020, wrote strategists including John Normand in a note Friday. It’s premature to call for an end to trade tensions, which could last for years, so investors should explore the value of tactical hedges and strategic underweight positions, they argued.

“Although some markets like developed market equities have begun recovering from May’s trade war escalation, it’s premature to extrapolate stability,” they wrote. Summer activity could show a renewed slump in manufacturing, risk premia are not very apparent and positioning adjustments have been modest, they said.

To be sure, tared-war predictions recently seem pretty dire.

A collapse of U.S.-China trade talks and hike in tariffs on Chinese goods would push the world economy towards recession and see the Federal Reserve cut U.S. interest rates back to zero within a year, analysts at Morgan Stanley said on Monday.

While a temporary escalation of trade tensions could be navigated without much damage at all, a lasting breakdown would inflict serious pain, Reuters explained.

"If talks stall, no deal is agreed upon and the U.S. imposes 25% tariffs on the remaining circa $300 billion of imports from China, we see the global economy heading towards recession," the bank's analysts said in a note.

In response, the Fed would cut rates all the way back to zero by spring 2020 while China would scale up its fiscal stimulus to 3.5% of GDP (equivalent to around $500 billion) and its broad credit growth target to 14-15% a year, they added.

"But, a reactive policy response and the usual lags of policy transmission would mean that we might not be able to avert the tightening of financial conditions and a full-blown global recession."

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
Barron’s recently told investors shopping for stocks that they are better off simply favoring cheap ones with decent long-term growth prospects than reacting to each new development on tariffs and other fleeting factors.
barrons, stocks, trade, war
506
2019-06-21
Tuesday, 21 May 2019 09:06 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved