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US-China Trade Conflict Intensifies: 5 Low-Beta Stock Picks

Trade tensions between the United States and China, which commenced March, are further intensifying as days progress. U.S. stock markets have been facing severe volatility since then primarily owing to imposition of various tariffs by the U.S. government and related trade conflict.

The situation is likely to intensify in the near term as President Trump has decided to implement a second phase with intentions of imposing tariffs worth $200 billion on Chinese goods. At this stage, it will be prudent to invest in in low-beta stocks with favorable Zacks Rank to keep one's portfolio safe from day-to-day market fluctuations.

Trump Imposes Fresh Tariffs on China

Ongoing trade conflicts between the United States and China, which started in March, is showing no signs of abatement. On Sep 17, President Trump said that he has given the go-ahead to the United States Trade Representative (USTR) for levying a fresh round of tariffs worth $200 billion on Chinese goods. The new tariffs, which will be implemented from Sep 24, will set at 10% till the end of this year. However, from Jan 1, 2019, targeted products will be subject to 25% tariffs.

Trump has further said that if China retaliates against U.S. tariffs, then a new round of tariffs worth $267 billion will be imposed on Chinese goods. Notably, the two countries have already imposed $50 billion of tariffs on each other. Notably, the value of U.S. imports from China, its largest trading partner, in 2017 was about $505 billion.

Meanwhile, the Chinese government has indicated that fresh round of U.S. tariffs will put upcoming U.S.-China trade negotiations in jeopardy, compelling China to retaliate step by step. China is reportedly seeking permission from the World Trade Organization to impose sanctions upon the United States.

National Security Concerns Dominate Tariff Decisions

Trump administration is deeply concerned about China's drive to unseat the United States as the primary developer and supplier of products in the fields of high-tech digital industries.

Notably, most of the big manufacturers of these products are patronized by the Chinese government. These companies have become a serious threat to U.S. economic and military supremacy. Information technology, telecommunications and consumer electronics are the primary Chinese industries which were targeted by the first phase of U.S. tariffs.

Trump's statement is a clear indication that the U.S. government will persist with 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.

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 five low-beta stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. You can see the complete list of today's Zacks #1 Rank stocks here .

The chart below depicts price performance of our five picks year to date.

Rent-A-Center Inc.RCII leases household durable goods to customers on a rent-to-own basis. It operates through four segments: Core U.S., Acceptance Now, Mexico and Franchising. It has a beta of 0.59. The company has expected earnings growth of 224.1% for current year. The Zacks Consensus Estimate for the current year has improved by 8.1% over the last 30 days.

Global Brass and Copper Holdings Inc.BRSS converts, fabricates, processes and distributes specialized non-ferrous products in the United States, Asia Pacific and Mexico. It operates in three segments: Olin Brass, Chase Brass and A.J. Oster. It has a beta of 0.21. The company has expected earnings growth of 14.8% for current year. The Zacks Consensus Estimate for the current year has improved by 6.3% over the last 30 days.

Urban Outfitters Inc.URBN is an innovative specialty retailer and wholesaler which offers a variety of lifestyle merchandise to highly defined customer niches through Urban Retail stores in the United States, Canada and Europe. It has a beta of 0.47. The company has expected earnings growth of 59.3% for current year. The Zacks Consensus Estimate for the current year has improved by 6% over the last 30 days.

DSW Inc.DSW is a leading branded footwear and accessories retailer that offers a wide selection of brand name and designer dress, casual and athletic footwear as well as accessories for women, men and kids. It has a beta of 0.87. The company has expected earnings growth of 14.5% for current year. The Zacks Consensus Estimate for the current year has improved by 7.4% over the last 30 days.

HCA Healthcare Inc.HCA is a non-governmental hospital in the United States providing a network of acute care hospitals, outpatient facilities, clinics and other patient care delivery settings. It has a beta of 0.54. The company has expected earnings growth of 40.1% for current year. The Zacks Consensus Estimate for the current year has improved by 4.5% over the last 30 days.

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Urban Outfitters, Inc. (URBN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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