Trade protection should not exclude growth stocks: Wall St outlook

The escalation of the trade war between the US and China has driven up dividend-rich sectors such as utilities, but investors do not yet need to be completely on the move. defensive, according to strategists who claim that there are many growth titles well isolated from China.

Some investors are seeking security in US growth stocks, ranging from software and online advertising to aerospace, through recruitment, as President Trump's May 5 tweets have shown that the talks between the United States and China were in trouble.

While the prospect of a protracted trade war has shaken the market, investors are also trying to protect themselves from the risk of losing gains in the event that the US and China reach a surprise deal.

Due to the difficulty in jeopardizing the chances of an agreement with China, John Praveen, portfolio manager at the QMA of Newark, NJ, said that he would not sell "completely" the actions. But he said: "If I was overweight at 5%, I could reduce it to 3% and see if I could reduce the exposure to semiconductors and technology."

"If you're looking to avoid pure dividend play and the tale of trading with China, you have to look at stocks that play a pure game on the US economy," said Peter Kenny, founder of Kenny's Commentary LLC at New York.

In general, investors have raised their defenses. While the S & P index has dropped about 4% since Trump announced plans to raise tariffs on Chinese products in early May, utilities – a slow-growing sector with relatively high dividends – increased by more than 2%.

But growth-hungry investors are looking for more dynamic companies with little exposure to overseas sales or Chinese imports, even in the troubled technology sector, where semiconductor stocks have led the recent decline.

Online advertising platforms and cloud software are two technology sectors that would not be directly affected by Chinese tariffs, said Daniel Morgan, a portfolio manager at Synovus Trust in Atlanta.

In online advertising, Morgan favors Twitter, Facebook and Snap Inc. over Google Alphabet, which this week suspended trading relations with Chinese Huawei following the commercial battle.

He also likes software vendors such as Salesforce.com, which earns 70% of its revenue from the Americas and only 10% from the Asia-Pacific region. However, Salesforce.com has dropped more than 5% since Trump's tweets.

Another option is Workday Inc., which has increased about 4% since May 5 and is drawing 75% of its US revenue.

Steve Lipper, senior investment strategist at Royce & Associates, favors US companies offering services such as merger recruitment and advice because of the strength of the US labor market and the strength of the US labor market. 39, merger activity.

But if American recruiting firms such as Kforce and ASGN Inc. are not likely to be directly affected by the trade war, Mark Marcon, an analyst for Robert W. Baird, says they would suffer if tariffs weaken the economy. .

Instead, Marcon favors national payroll software vendors such as Automatic Data Processing Inc. and Paychex Inc., which tend to do better than recruiters in times of economic downturn. But even if their fundamentals remain strong, payroll companies like Paycom and Paylocity could be vulnerable to massive selling because of the relatively high value of their valuations, Marcon said.

In the industry – a highly exposed industry in China – Burns McKinney, a portfolio manager at Allianz Global Investors in Dallas, likes defense values ​​such as Raytheon and Lockheed Martin, which could benefit if hostilities between Iran and the United States continued to intensify.

Since sectors such as utilities have increased so much, Lipper de Royce favors less obvious security choices.

"Be wary when the consensus is already reflected in the assessments," Lipper said, but he added, "The US economy is so diverse that there are still isolated areas of everything that concerns you ".