Market Monitor: Jeremy Bryan

Jeremy Bryan, Gradient Investments Portfolio Manager

Theme:

Stocks that are valuable despite rising China / US trade tensions

Current situation and outlook:

Certainly the trade relations between US and China will be at the forefront of investor’s minds and could have significant impact on industries reliant on import / export prices.  We expect that markets could remain choppy in the short to medium term, but we believe this will also provide opportunities to buy or add to companies that will remain valuable even in the face of rising trade restrictions.  Below are some of the stocks that we would highlight in that regard.

  • Starbucks (SBUX):An $80B consumer discretionary company in the restaurant industry

o   This is a Chinese growth story, but much more on brand expansion within the Chinese market, not on whether tariffs are imposed on their goods

o   SBUX recently reiterated their growth target of 12% or greater EPS growth

o   The stock will work on a reacceleration of US comps (2% or greater) and continued expansion into the Chinese market

  • Chevron (CVX): A $219B integrated oil company

o   One of the largest oil producing companies in the world – will be much more driven by oil prices rather than trade related issues

o   Currently has a near 4% dividend yield and cash flow has been steadily improving

o   The stock is trading at $114, the same level as last November.  This is despite oil prices going from the low $50’s to the mid $60’s during that time – this makes CVX much more profitable

o   CVX last quarter was weak, with many one-time items, but we expect improving financials throughout the year

  • Celgene (CELG):A $65B health care company in the biotechnology industry

o   The stock has had a large tumble on recent negative news on their product pipeline and continued worries on a 2022 patent expiration for their largest drug, Revlimid (cancer drug)

o   We believe the stock has overreacted to the news, and Celgene still has significant cash flow from Revlimid to spend on R&D and/or acquisitions to continue to grow in the future

o   The stock currently trades at less than 11x NTM earnings while growing earnings over 15% for the next 2 years

o   This stock will not be affected by trade relations as nearly 90% of 2017 revenue was derived from the US and Europe

Disclosures:

The investments discussed are owned in advisory strategies managed by Gradient Investments, LLC.  Jeremy Bryan also has personal ownership of Starbucks (SBUX) and Celgene (CELG) at the time of this published content.  The holdings of Gradient Investments, LLC and Jeremy Bryan are subject to change at any time. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. 

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