Perhaps in any other administration, our rapidly deteriorating relationship with China could have been salvaged quickly and without much pain. However, with President Trump onboard, the retaliatory tariffs issue has devolved into a full-blown trade war.
On Monday, the White House announced preparations for additional tariffs on all Chinese imported goods which previously escaped sanctions. Altogether, the new penalties are worth $257 billion. Unless Trump and Chinese President Xi Jingping can come to terms in the upcoming talks between the two leaders, the trade war is likely to worsen.
That represents a major blow for investors seeking viable stocks to buy. The benchmark Dow Jones received a critical blow, dropping 1% and falling deeper into the red for the year. Unsurprisingly, the Technology Select Sector SPDR Fund (NYSEARCA:XLK) was one of the worst-performing segments, shedding 1.7% as investors ran away from China-exposed semiconductor firms.
At least in the nearer-term, the running may continue. The trade war is unfortunately multi-faceted. While Trump must protect American intellectual property and security interests, China is the world’s second-biggest economy. Playing hardball could be counterproductive, particularly because American companies are levered toward the Asian juggernaut.
However, that doesn’t mean you should entirely give up on the markets. Despite some awful performances in most sectors, you can still seek profitable shelter. Here are seven stocks to buy while you wait out the trade war:
Procter & Gamble (PG)
The best advice for seeking shelter during a trade war with China is to not get involved in one. Of course, that’s completely out of our hands, so the next best option is to think boring. For that, I can’t think of a better boring name among stocks to buy than Procter & Gamble (NYSE:PG).
PG stock represents an investment into ubiquity. Whether you brush your teeth, clean your tub, or wipe yourself after using the facilities, you’ve more than likely used Procter & Gamble products. A trade war will not make these essential activities disappear; hence, the consumer-staples company enjoys consistent and stable demand.
All you have to do is to look at the performance of PG stock. While it tumbled during the first half of the year, management rewrote the tale for the second half. Plus, in October, shares have jumped nearly 7%. This is a far cry from the Dow, which has dropped 8%.
Finally, PG stock offers a 3.3% dividend yield, which would come in very handy during a potential trade war.
Another smart idea for stocks to buy amid a heated economic conflict are big-box retailers. Unless bombs start falling on Main Street, consumers will still consume. In such a stressful time, I’m looking to park my money in proven sector leaders like Costco (NASDAQ:COST).
COST stock is one of those investments that seemingly can’t do any wrong. Although it hasn’t had the best October performance – shares are down nearly 6% for the month – the company equity has stabilized on its $220 support line. For the year, shares are up a relatively impressive 20%.
Fundamentally, I like my chances that COST stock will weather a trade-related storm. Unlike its competitors in the grocery sector, Costco has a favorable 1.12 cash-to-debt ratio. If the trade war escalates, and if it takes longer than anticipated, management has extra resources to cushion the blow.
And while it’s not a dividend monster by any means, I appreciate that COST stock at least pays out something.
Altria Group (MO)
I wouldn’t classify Altria Group (NYSE:MO) as boring. It’s definitely on the controversial side. And while I acknowledge that MO stock generates strong feelings on the moral and political spectrum, I must mention this: Altria has gone against the grain.
On Monday while the major indices were flirting with disaster, MO stock gained nearly 2.4%. For the month of October, shares are up 7%. Although the tobacco-maker is still down on a year-to-date basis, since the second half, Altria flew 16%.
So why is “old school” tobacco suddenly considered among the stocks to buy? Part of the story is completely unrelated to the ongoing trade war. Last month, the Food and Drug Administration cracked down on e-cigarette companies, demanding they help prevent teen vaping.
Another reason is that big tobacco firms produce better e-cigarettes that accurately mimic “analog” smoking. Vaping and smoking are different disciplines, if you will. Altria obviously levers substantial experience with smoking products, which is a net positive for MO stock.
But the trade war is a huge benefit for Altria and all tobacco firms because virtually all vaporizers are made in China. If things get ugly, MO stock becomes the last man standing.
AMC Entertainment (AMC)
When I covered AMC Entertainment (NYSE:AMC) for its last earnings report for the second quarter, the common criticism was that the company was an archaic one. With content streaming taking over the media landscape, AMC stock on the surface didn’t make much sense. A horrific slide last year didn’t help matters, either.
The cineplex-operator beat on both the top and bottom lines, proving that consumers still desired the box-office experience. This is what separates AMC stock from a Netflix (NASDAQ:NFLX) or an Amazon (NASDAQ:AMZN). Don’t get me wrong: I love these streaming companies. But they simply can’t replicate what AMC delivers every weekend.
Not only that, when you adjust for inflation, going to the movies is a comparatively cheap experience. A family of four can make their dollars last longer – even with expensive concessions — with a summer flick as opposed to attending an NFL game.
Finally, a full-blown trade war might help AMC stock. Behavioral studies indicate that people seek escapism through movies during rough times.
SPDR Gold Trust (GLD)
It’s probably the oldest investment in human history, which sharply contrasts in the current information age. But because gold is the ultimate legacy asset, and due to its universal acceptance, it offers ideal financial shelter. For those that want the benefits of gold ownership without physically holding it, you have SPDR Gold Trust (NYSEARCA:GLD).
Admittedly, the GLD overall hasn’t performed to my expectations. However, this current timeframe has a different complexion. The most conspicuous factor is the broader markets. After years of consistently strong returns, we’re finally witnessing a genuine correction. Typically, fear in the markets translates to upside for gold as investors seek reliable shelter.
Another tailwind for the GLD is the potential response from the Federal Reserve. The benchmark 10-year Treasury yield has dipped from this month’s highs, and this trend could continue. With equities getting blasted, a higher interest rate doesn’t do any good. A corrective monetary policy would likely boost gold prices, and thus, the GLD.
Plus, we have a very unpredictable situation. Both Trump and Xi are proud men and are unwilling to budge to protect their reputations. Therefore, we could have an extended stare down, which creates multiple variables. This does, however, embolden GLD investors.
Not all stocks to buy come from boring or predictable sectors. While completely counterintuitive during a trade war with China, Intel (NASDAQ:INTC) makes a strong case for itself.
I’ll start with the most obvious factor, which is market performance. While rivals like Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) recently cratered, INTC stock has held its own. Granted, Intel isn’t doing well: for this month, shares are down 3%. However, I’m sure competitors would love to switch places with INTC, many of which have suffered horrendous hemorrhaging.
Fundamentally, I’ve liked Intel because it has multiple opportunities, especially the 5G network rollout. Plus, with INTC stock taking a good-sized beating throughout the second half of this year, it represents a contrarian’s dream. On paper and for its longer-term potential, the company became madly undervalued.
InvestorPlace contributor Nicolas Chahine shares this sentiment, pointing out:
As Intel was falling, Wall Street was falling madly in love with AMD and perhaps too much so. I still favor Intel over AMD because I am a value investor, and Intel actually has some. Meanwhile, AMD still runs red. INTC stock is down 6% year-to-date while AMD is up 125% for the same period.
And now with Intel soundly beating Q3 estimates? You’d be crazy to overlook INTC stock.
NTT Docomo (DCMYY)
Leading up to this month, telecom titans Verizon Communications (NYSE:VZ) and AT&T (NYSE:T) duked it out over the 5G rollout. Technically, Verizon won the first bout, although it used non-standard equipment to get there.
But while this battle raged, NTT Docomo (OTCMKTS:DCMYY) made significant strides of its own. In early May of this year, the Japanese mobile-phone operator became likely the first company to successfully transmit 28 GHz wireless data between 5G base and mobile stations. That had many people eyeing DCMYY stock.
I can make an argument that NTT Docomo’s achievement was more impressive than Verizon rolling out a commercial 5G network. Verizon’s network only involves residential services for now. On the other hand, NTT Docomo tested 5G transmissions using vehicles traveling near 190 mph. The practicality factor favors DCMYY stock.
Lastly, Japan is going to host the Summer Olympics in two years time. It’s a perfect opportunity for Japanese companies to lead the world in 5G capabilities. That naturally benefits DCMYY stock.
As of this writing, Josh Enomoto is long AMC and gold bullion.