Cohn’s Exit Raises Odds of a Trade War! 4 Top Stocks to Buy

By Tirthankar Chakraborty, Zacks Investment Research

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President Trump’s plan to slap hefty tariffs on foreign steel and aluminum compelled top economic adviser, Gary Cohn, to depart from the White House. After all, Cohn was the last man standing in the way of such a protectionist stance.

Cohn's Exit Raises Odds of a Trade War! 4 Top Stocks to Buy
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With the stepping down of Cohn, the odds of the imposition of tariffs are higher. Now, it will be easier for the White House to take tougher action against China and this might also lead to collapse of the North American Free Trade Agreement (NAFTA).

Naturally, market pundits are panicking over the retaliatory tariffs that may harm the global economic growth. The European Union (EU) has already chalked out a plan to impose penalties on iconic U.S. brands, while the World Trade Organization (WTO) warned Trump that his proposed tariffs will trigger tit-for-tat protectionist measures.

With growing fears of a trade war, the broader market continues to move in and out of the negative territory. Despite such turbulence, not all stocks should be treated equally as a few are protected against the impact of a trade war. These stocks are sound enough to dismiss tariff fears and keep scaling higher.

Before we look into such stocks, let’s understand why Cohn’s resignation will spark a global trade war.

Cohn: Advocate of Free Trade

Most recently, Trump shocked the global market by announcing high tariffs on imported steel and aluminum. The President plans to impose a 25% tariff on steel imports and 10% on aluminum.

Cohn had opposed the high tariff proposal and called for a moderate approach toward protectionist trade policies. He was aware that such protectionist trade policies will lead to retaliation, crippling the  economy engaged in such trade wars. Such trade policies affect several industries, causing the unemployment rate to rise and bumping up the price of essential commodities.

But Gary’s departure removed a restraining influence in the White House. His departure leaves the trade policy mostly in the hands of hawkish figures like Trade Representative Robert Lighthizer and economic adviser Peter Navarro. They have expressed their views on using tariffs on countries that have unfairly taken advantage of the United States.

Needless to say, Trump’s announcement on a pair of tariffs drew protests from major trading partners like the EU and Canada, both of which threatened to adopt retaliatory measures. The EU confirmed that they will slap tariffs on some well-known American brands, including Harley Davidson motorcycles, Levi’s jeans and bourbon whiskey.

Trade War Heats Up! Buy These 4 Stocks: Facebook Inc (FB)

Cohn’s sudden exit rattled the stock market, stoking fears that the United States could fight a trade war. Thus, we have selected four stocks that are immune to tariff fears and will keep moving north. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Facebook — Part of the Global Digital Advertising Industry

Steel and aluminum tariffs hardly affect the prospects of companies that are part of the global digital advertising industry. In this regard, Facebook Inc (NASDAQ:FB) is a solid choice since it is a global digital advertising and distribution platform. Facebook controls about 20% of the U.S. digital ad market.

Facebook has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings moved up 9.8% in the last 60 days. The stock’s projected earnings growth rate for the current quarter and year are 13.8% and 16.7%, respectively. The company has outperformed the broader industry in the past year (+32.9% vs +20.5%).

Trade War Heats Up! Buy These 4 Stocks: Axon Enterprise Inc (AAXN)

Axon Enterprise — Mostly Sells to Government Agencies

Axon Enterprise Inc (NASDAQ:AAXN) that operates through two segments, TASER Weapons and Axon, continues to be attractive amid trade war anxieties. And why not? The company sells an array of digital solutions to government agencies that makes them recession proof. No matter what happens with tariffs, government agencies will upgrade their institutions.

Axon Enterprise has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings surged 57.1% in the last 60 days. The stock’s projected earnings growth rate for the next quarter is a whopping 100%. The company has outperformed the broader industry in the last one-year period (+76.8% vs -23.8%).

Trade War Heats Up! Buy These 4 Stocks: Boeing Co (BA)

Boeing — Increase in Cost of Aluminum Insignificant

Investors may be fretting that tariffs on aluminum will increase its cost, a key component in plane construction. This in turn might hamper the world’s largest aerospace company, Boeing Co (NYSE:BA). But, Boeing has just a trade war exposure of 35.2%, per Fundstrat. Even if the costs rise, it will be passed on and ultimately borne by consumers.

Right now, Boeing has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings rose 27.8% in the last 60 days. The stock’s estimated earnings growth rate for the current quarter and year are 32.3% and 16.7%, respectively. The company has outperformed the broader industry in a year’s time (+92.2% vs +48.1%).

Trade War Heats Up! Buy These 4 Stocks: Pioneer Natural Resources (PXD)

Pioneer Natural — Operation Limited to the U.S.

Pioneer Natural Resources (NYSE:PXD) operates as an independent oil and gas exploration and production company in the United States. Since it has high domestic exposure in terms of revenue generation, it’s shielded from international disputes. It is thus fairly immune to the adverse effects of a trade war.

The stock has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings moved up 69.5% in the last 60 days. The stock’s projected earnings growth rate for the current quarter and year is more than 100%. The company has outperformed the broader industry in the past year (+32.9% vs +20.5%).

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