Faced with an escalating trade war, investors need to start paying attention to which stocks will take a hit from the tariffs - and which won't.
That's why we've put together a list of the 10 best stocks to buy not just to defend your portfolio, but to make money while others are panicking.
But before we get to that list, you need to know how the trade war is likely to affect different types of stocks.
This trade war started in March when U.S. President Donald Trump imposed tariffs on imported steel and aluminum. Shortly afterward, he placed tariffs on $34 billion worth of goods from China.
These countries (particularly China) retaliated by placing tariffs on billions of dollars' worth of U.S. goods.
President Trump raised the stakes a few weeks ago with another round of tariffs on $200 billion worth of Chinese products. Again, China responded in kind.
The tariffs affect a broad range of U.S. products from textiles and food to electronics and machinery.
Free Book: The secrets in this book helped one Money Morning reader make a $185,253 profit in just eight days. Learn how to claim your copy here...
The UK-based research firm Oxford Economics said in a report earlier this month that the Trump trade war could chop as much as 0.1 percentage points off the U.S. gross domestic product (about $21 billion).
Here are the sectors and companies that will get hit the hardest...
Stocks to Avoid in the Trump Trade War
The U.S. companies most vulnerable to trade war trouble are those that derive a significant chunk of their revenue from abroad. That's not to say all of these stocks will do badly in the long run, but for as long as the trade war rages, they'll remain under pressure.
Tech stocks are perhaps the most exposed, semiconductors in particular. Trump's $200 billion salvo on Chinese goods in July cut 12.9% off both Intel Corp. (Nasdaq: INTC) and Micron Technology Inc. (Nasdaq: MU) stock.
Meanwhile, Qualcomm Inc. (Nasdaq: QCOM) turned up on Morgan Stanley's top 10 list of stocks likely to get hit the hardest in the trade war.
Another sector at risk is autos. The U.S. tariffs on steel and aluminum will raise manufacturing costs by thousands of dollars per vehicle. Automakers will need to either eat those costs or raise the prices they charge customers. Chinese tariffs will add even more to the cost of imported U.S. autos, which will hurt sales there.
Finally, investors need to be cautious with multinational stocks. Companies vulnerable to trade war issues include Caterpillar Inc. (NYSE: CAT), 3M Co. (NYSE: MMM), Deere & Co. (NYSE: DE), and Tiffany & Co. (NYSE: TIF).
Meanwhile, companies that derive most or all of their revenue domestically will have some insulation from the trade wars.
That's where we started when compiling our list of the top 10 stocks to buy to beat the trade wars. We then screened those stocks for those with the highest Money Morning Stock VQScore™ of 4.75, indicating they're a strong buy with above-average growth potential.
With these stocks, you'll do more than survive the Trump trade war - you'll come out ahead...
The 10 Best Stocks to Buy To Pile Up Gains Despite the Trade War
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
This list was compiled from the 430 or so stocks that make up the iShares Russell 1000 Pure US Revenue ETF (NasdaqGM: AMCA).
Frankly, for investors interested in a pure defensive play, the AMCA exchange-traded fund is a great choice. The fund screens the Russell 1000 index for U.S. companies that derive 85% or more of their sales from within the United States.
Click here to see all of our top rated stocks, and you'll automatically get free updates on our top stock picks, based on our proprietary rating system, the Money Morning Stock VQScore™.
That should minimize damage from the tariffs, but it won't really account for growth. By adding our screen for the top Money Morning VQScore stocks, we came up with a list of companies that should add to your wealth, not simply preserve it.
We also screened for companies with the largest market caps ($10 billion and up), giving us a group of solid, dependable companies with minimal risk and lots of upside.
10) Southwest Airlines Co. (NYSE: LUV)
Market cap: $30.78 billion
Stock price: $53.93
9) Charter Communications Inc. (Nasdaq: CHTR)
Market cap: $72.23 billion
Sector: Pay TV
Stock price: $300.11
8) Principal Financial Group Inc. (Nasdaq: PFG)
Market cap: $15.49 billion
Sector: Insurance - Life
Stock price: $55.71
7) J.M. Smucker Co. (NYSE: SJM)
Market cap: $12.31 billion
Sector: Packaged foods
Stock price: $109.09
6) T-Mobile US Inc. (Nasdaq: TMUS)
Market cap: $52.19 billion
Sector: Telecom services
Stock price: $60.59
5) AT&T Inc. (NYSE: T)
Market cap: $195.83 billion
Sector: Telecom services
Stock price: $31.73
4) Comcast Corp. (Nasdaq: CMCSA)
Market cap: $162.42 billion
Sector: Pay TV
Stock price: $34.03
3) CenterPoint Energy Inc. (NYSE: CNP)
Market cap: $11.96 billion
Sector: Utilities - Regulated gas
Stock price: $27.61
2) Duke Realty Corp. (NYSE: DRE)
Market cap: $10.29 billion
Sector: REIT - Industrial
Stock price: $28.32
1) WestRock Co. (NYSE:WRK)
Market cap: $14.63 billion
Sector: Packaging and containers
Stock price: $57.69
This Man Can Show You How to Make Money in ANY Market - Bull, Bear, or Sideways
This champion stock picker first gave his readers the chance at fortunes during a huge market crash - Black Monday, August 2011, when the United States' credit rating was downgraded for the first time in history. Since then, his stock-picking method has brought his readers the chance at peak gains of 1,000%! And he's had a nearly unstoppable track record ever since. Learn more about the secrets of his method by clicking here.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.