Of late we have written about switching investment focus from growth to value as we have been ruminating about the possibility of a stock market crash, economic recession, and collapse of the real estate market, all caused by a trade war. Materials stocks have been hurt by Trump’s announcement of tariffs on steel and aluminum. The bull market has been historic and is likely to cool off if we are lucky and collapse if we are not. How can you invest and not get hurt by a trade war? Our sister site, Profitable Trading Tips, provided a few ideas in their article about trade war-proof stocks.
When Trump announced increased tariffs on imported steel and aluminum the markets fell. A trade war would be the nail in the coffin for an already-aging bull market.
To be protected from a trade war with China these companies need to be ones that do not do a lot of business in or with China. It turns out that the FANG tech darlings that have helped drive the US market higher and higher are somewhat trade war-proof stocks at least when it comes to China.
It turns out that Facebook, Amazon, Netflix, and Google (Alphabet) either do not do business in China or have a very limited presence. Even though these stocks have become somewhat pricey in the current market they could not be directly hurt in a trade war with China. Other choices might be totally domestic companies but they could get hurt by high material costs. But, what are some other choices that you can invest in and not get hurt by a trade war?
Entertainment and Biotech
The Motley Food suggests 3 stocks you can buy on sale. Their thesis is that these are fundamentally strong stocks with low P/E ratios.
With the bull market in its ninth year, you might think it’s hard to find high-quality stocks that aren’t expensive. But that’s not the case at all. And you can find such stocks in several sectors.
Their suggestions are AbbVie, Disney, and Micron Technology. The two that mostly catch our eye are the biotech stock AbbVie and entertainment giant Disney. The value of biotech stocks is that these companies invent new treatments for diseases. AbbVie makes Humira which is a drug for autoimmune diseases and at $14.8 Billion in sales was the world leader. The pipeline for potential cures for everything from diabetes to various forms of cancer is full and as these come on line the companies that invent and market them will have cash cows that provide income streams into the indefinite future. And, it is unlikely that any nation on earth will block the entry of these miracles cures with punitive tariffs when their presence could cure diseases.
Disney entertains. They have been at this since Walt Disney helped invent animated pictures with Steamboat Willy whom became Mickey Mouse. A key to Disney’s success is the ability to make money on an idea several times over with trademarked products and theme parks based on blockbuster films. Disney will not go away in a trade war or recession and will keep making money year in and year out no matter what Trump does to tariffs.