There’s a lot of chaos in Europe right now. There’s been a major slowdown in China, and Japan, Italy (and soon Germany) are in a recession. And, of course, there’s Brexit — the most chaotic mess of them all.
Here’s a quick recap: Back in late June 2016, Britain voted to leave the European Union (EU). The vote shocked the world, especially the EU and even the people of Britain. So, in the nearly three years since, the EU and British Parliament have failed to come to a deal, and the initial Brexit date of March 29, 2019 has passed.
So far, Prime Minister Theresa May has failed multiple times to convince Members of Parliament (MPs) to approve her revised exit plans. In fact, she even offered to resign if the MPs agree to Brexit. The reality is that most MPs are not in favor of Brexit, and are secretly hoping for a second referendum vote.
But now the EU has another big problem on its hands. This morning, President Trump announced billions in new tariffs:
The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!
— Donald J. Trump (@realDonaldTrump) April 9, 2019
The stock market stumbled on the news, with the Dow falling more than 200 points, though it did bounce back into the close after the “smart money” jumped in later in the afternoon.
So, what does this mean for stocks going forward? And should you be worried?
My answer is no. That said, I also suggest taking a more domestic investing approach.
The U.S. is the oasis around the world. Our economy is resilient and on track for solid 2% growth this year. That makes the United States a safe haven for investors all over the world. (The strong dollar is great evidence of that.) So, the best investments remain in domestic companies.
But it’s not always that simple, since many stocks are multinationals these days.
This being the case, you don’t want to “throw the baby out with the bathwater” by ditching great investments. But, at the same time, you certainly don’t want your portfolio dragged down by too much exposure to the situations I mentioned before.
That’s where my Portfolio Grader comes in.
My ratings tool does not know what Theresa May, Donald Trump, Angela Merkel, or anyone else is doing and saying. But it does know where big money is flowing. And when that nozzle shuts off, it’s time to take a second look. Over many years, I’ve found that this type of money flow is the biggest determining factor in an investment’s success (or failure).
You also want to look at the fundamentals. And if a multinational company’s earnings, sales, cash flow, etc. aren’t so hot now…then its exposure to Brexit and trade wars certainly isn’t going to help matters!
With that in mind, these are stocks to watch — and avoid:
|Company||Symbol||Quantitative Grade||Fundamental Grade|
|International Game Technology PLC||NYSE:IGT||F||D|
|Nordic American Offshore Ltd.||NYSE:NAO||F||C|
|Nomura Holdings (ADR)||NYSE:NMR||F||F|
|Ryanair Holdings PLC (ADR)||NASDAQ:RYAAY||F||D|
|Telecom Italia (ADR)||NYSE:TI.A||F||D|
|Venator Materials PLC||NYSE:VNTR||F||D|
Some of them are U.K.–based, right in the middle of the Brexit mess. Nomura is not only Japan’s largest asset manager — but does plenty of European business from its London office. Telecom Italia isn’t faring much better, with the economic malaise there. And the rest have exposure to all sorts of troubled economies.
As you can see, Portfolio Grader gives all of these vulnerable stocks an “F” for their Quantitative Score, my proprietary indicator of money flow.
Instead, money is flooding into stocks that have much stronger fundamentals, AND another key factor of success: a healthy dividend.
By that, I mean a dividend with a long history…that’s growing over time…and comes from a business that can sustain that in the future.
In a world of slow growth — and no yield — these are the companies that will do well on Wall Street…while the others struggle.
I call them “Money Magnets.” And you can see exactly what makes them such a compelling opportunity at this link.
Even in troubled times, money has to go somewhere. It’ll just go into fewer and fewer stocks.
Which makes these stocks a cash cow to those of us who get positioned now.
It’s not too late. But I’d hate for anyone to look back on this in a few months, and wish they’d acted. Because there won’t be much I can do about it then.