The U.S. stock market has been quite volatile over the past several weeks as investors speculate on the likelihood of a trade war with China and its danger to the American economy.
But not all stocks will be hurt by a trade war.
In fact, a trade war between China and the U.S. could have positive effects on some American companies.
Generally speaking, trade conflict could be beneficial to domestic-focused U.S. companies relative to firms with proportionally large foreign assets and sales.
With that in mind, I present to you four stocks to play Trump’s trade war…
The Boston Beer Company (NYSE: SAM)
The Boston Beer Company is a craft beer maker best known for its Samuel Adams line of brews. But the company also produces malt beverages and hard cider, including Twisted Tea Hard Iced Tea and Angry Orchid Hard Cider.
Boston Beer produces its beverages at company-owned breweries and under contract agreements at other brewery locations. These breweries are principally in the U.S., located in Massachusetts, Ohio, New York, Pennsylvania, Florida, and California.
The company also primarily sells its products in the United States. It distributes its brews to a network of about 350 wholesalers in the U.S.
Boston Beer does market its beverages internationally, but to a much lesser extent.
With predominantly domestic sales and production, the Boston Beer Company is well positioned to weather a trade war between the U.S. and China for a number of reasons.
First, a trade war between China and the U.S. is likely to drive down the value of the dollar against other foreign currencies. This will mean higher employee costs for companies that rely heavily on foreign production. With its factories here in the U.S., Boston Beer won’t be significantly affected by a declining dollar.
The Boston Beer Company is also well positioned to benefit from trade wars because they tend to lead to recessions.
Along with tobacco and gambling, the alcohol industry is well known as one of the most recession-proof sectors. Truth is, during bad times, the bad succeed. In a recession, consumers might not go out to buy a new TV, but they won’t pass on a cigarette or a cold bottle of beer.
Boyd Gaming Corporation (NYSE: BYD)
Speaking of sin stocks, Boyd Gaming Corp. is perhaps best positioned to avoid the consequences of a trade war with China relative to its larger counterparts.
While gaming giants like Las Vegas Sands (NYSE: LVS) and Wynn Resorts (NASDAQ: WYNN) are better known, these companies generate more than half of their revenue from the Chinese special administrative region of Macau, not Las Vegas.
Boyd, on the other hand, only has properties in the United States. Most of the company’s properties are in Las Vegas. But it also has 12 casinos in six states outside of Nevada, as well as a vacation property in Hawaii.
A decline in the dollar will make travel to the U.S. cheaper for foreign visitors, which could lead to an increase in foreign customers and revenue for Boyd. And being in one of the most recession-proof industries, Boyd could also benefit from a downturn in the economy as American customers roll the dice in hopes of hitting it big.
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CVS Health Corp. (NYSE: CVS)
Some things you simply can’t do without. And for everyone at some point in their lives, prescription medicine is one of them.
CVS is the largest pharmacy health care provider in the United States. The company employs nearly 250,000 people at 7,700 locations in all 50 states. And 100% of its sales are domestic.
While many of the products sold at CVS are imported, the majority of the drugs the company sells are manufactured domestically. Despite common belief, approximately 75% of all U.S. spending on prescription drugs is for products made in America.
There are actually very few prescription drugs that are imported from China. The U.S.’s top five sources of pharmaceutical imports by value are Ireland, Germany, the UK, Switzerland, and India. However, China is one of the largest suppliers of ingredients used to make U.S.-consumed prescription drugs.
This could lead to an increase in the price of prescription drugs. Still, no matter what happens with the economy, consumers always need prescription medication and certain household items on a recurring basis. And being a very domestic-facing company, CVS will mostly likely be able to weather a trade war with China.
Public Storage (NYSE: PSA)
The private storage business actually dates all the way back to the late 1800s. Back then, businesses pioneered the household moving industry, which led to the side sector of storing personal affects in warehouses and other buildings.
But the first self-storage units as we know them today opened in Texas in the 1960s. These were the first kinds of units to have garage doors that were accessed individually by the owner.
At first, the self-storage business catered to construction and other industries that needed temporary places to store equipment. But as the baby boomer generation grew up, there was a growing demand for storing household item. And soon enough, Americans filled up the spaces with stuff like unused furniture and exercise equipment.
Today, there are nearly 55,000 self-storage units in America. And the largest brand of self-storage services in the U.S. is Public Storage.
The majority of Public Storage’s facilities are located in the U.S. But the company has over 2,200 locations across North America and Europe. Public storage also owns a significant stake in an office parks subsidiary, sells packing supplies, and provides other services. As a REIT, the company is owned by real estate investors who receive more than 90% of their profits as a return on investment.
During the economic decline of 2008, self-storage was the only REIT sector to post a positive return. This puts Public Storage in a good position to ride out any trade war with China.
Trade war or not, there will always be ways to profit from stocks. These four companies look to be among the biggest winners.
Until next time,
Luke Burgess
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
