Trade related conflicts, which started in March due to President Trump’s imposition of tariffs on imported steel and aluminum, are showing no signs of subsiding. Investors’ apprehensions regarding an impending global trade war have kept the market on edge resulting in severe volatility for the last five months.
The United States and China are yet to reach any sort of understanding to defuse trade tensions between the countries. Moreover, the U.S. government has extended tariffs on imports from Canada, Mexico and the European Union.
Furthermore, geopolitical conflict related to Iran has escalated. All these factors are resulting in market fluctuations on a regular basis. At this juncture, investment in low-beta stocks with favorable Zacks Rank will be a lucrative option.
US-China Trade War Fear Reignites
In an interview to CNBC on Jul 20, President Trump said his administration will not hesitate to impose tariffs worth $505 billion on Chinese goods should the need arise. Notably, the amount of Chinese goods exported into the United States in 2017 was $505 billion while U.S. export to China was only $129.9 billion.
Trump’s statement is a clear indication that the U.S. government will continue trade conflicts with China as long as China doesn’t refrain from forcing the U.S. corporates into joint ventures with Chinese companies to do business in the country. Moreover, China can no longer coerce U.S. companies to transfer technology in order to form joint ventures.
Tensions with European Union Intensify
Trump also warned the European Union of dire consequences if his meeting with EU officials next week doesn’t yield what he considers a fair auto trade deal. Trump has hinted that the U.S. government may raise tariffs on auto products from 2.5% to 20% imported from the European Union.
The European Union is reportedly considering a list of U.S. products on which tariffs can be imposed to counter Trump’s auto tariffs. Notably, on Jun 1, the U.S. government levied 25% and 10% tariffs on imported steel and aluminum from European Union, respectively.
Geopolitical Conflicts with Iran Escalates
In May, the United States walked out of the Iran nuclear pact formed in 2015. The Trump administration wants all countries to stop importing oil from Iran by Nov 4 or face the risk of U.S. sanctions. On Jul 22, Iranian President Hassan Rouhani cautioned the United States about pursuing hostile policies against it, saying: “War with Iran is the mother of all wars.”
Against that warning, President Trump tweeted on Jul 23, stating “”Never, ever threaten the United States again or you will suffer consequences the likes of which few throughout history have ever suffered before.”
Our Top Picks
Stock markets are likely to remain volatile in near future due to trade concerns, geopolitical conflicts and may be some sector specific issues. At this stage, investment in low-beta stocks will be fruitful. The beta is equal to 1 which means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1. However, picking winning stocks can be a difficult task.
This is where our VGM Score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select the winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.
We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM Score of A.
The chart below depicts price performance of our five picks year to date.
Low-Beta Stocks to Combat Trade and Geopolitical Tensions: W.W. Grainger Inc (GWW)
W.W. Grainger Inc (NYSE:GWW) is the leading broad line supplier of facilities maintenance products serving businesses and institutions throughout North America.
It has a beta of 0.81. W.W. Grainger has expected earnings growth of 37.2% for current year. The Zacks Consensus Estimate for the current year has improved by 5.1% over the last 30 days.
Low-Beta Stocks to Combat Trade and Geopolitical Tensions: Progressive Corp (PGR)
Progressive Corp (NYSE:PGR) provides personal and commercial property-casualty insurance, and other specialty property-casualty insurance and related services primarily in the United States. It has a beta of 0.67.
The Progressive has expected earnings growth of 66.2% for current year. The Zacks Consensus Estimate for the current year has improved by 5.6% over the last 30 days.
Low-Beta Stocks to Combat Trade and Geopolitical Tensions: Mammoth Energy Services (TUSK)
Mammoth Energy Services (NASDAQ:TUSK) is engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves and energy infrastructure.
It has a beta of 0.59. Mammoth Energy Services has expected earnings growth of 301.4% for current year. The Zacks Consensus Estimate for the current year has improved by 9.8% over the last 30 days.
Low-Beta Stocks to Combat Trade and Geopolitical Tensions: Integer Holdings (ITGR)
Integer Holdings (NYSE:ITGR) is a medical device outsource manufacturer serving the cardiac, neuromodulation, orthopedics, vascular, advanced surgical and power solutions markets. It has a beta of 0.91.
Integer Holdings has expected earnings growth of 23.5% for current year. The Zacks Consensus Estimate for the current year has improved by 3% over the last 30 days.
Low-Beta Stocks to Combat Trade and Geopolitical Tensions: Intel Corporation (INTC)
Intel Corporation (NASDAQ:INTC) is one of the world’s largest semiconductor chip maker developing advanced integrated digital technology products, primarily integrated circuits, for industries such as computing and communications. It has a beta of 0.97.
Intel has expected earnings growth of 16.5% for current year. The Zacks Consensus Estimate for the current year has improved by 0.2% over the last 30 days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it’s predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce “the world’s first trillionaires,” but that should still leave plenty of money for regular investors who make the right trades early.