Increased trade tensions continue to weigh on the overall market. The Dow Jones has been falling since late April when it became obvious to the market that a potential trade deal between the U.S. and China would take much longer than expected. This of course led to more tariffs, and most recently President Trump announced new tariffs on the country’s southern neighbor, Mexico.
There is no questioning the fact that all nations involved in the trade war are getting hurt, and politicians face backlash as consumers start to see the impact of the trade war in the form of higher prices.
As trade war tensions linger, the market will remain volatile, but the pullbacks in the broader market can also be used to pick up shares in stocks that were trading much higher just a month ago and should regain their strength as trade tensions ease.
Here are five stocks that look like a great value after cooling off over the last month.
Microsoft (MSFT) has avoided much of the market volatility, but the stock has pulled back from its all-time high set in mid-April as weakness hit the overall market. Microsoft remains a very attractive long-term play as the company continues to grow its cloud-computing services. While the PC market has shrunk, Microsoft remains the dominant player in the sector. Cloud-computing is the real growth driver for the company which is expected to grow profits at an annual rate of 15% over the next five years. MSFT has been a strong outperformer in recent years, and the company’s strong earnings growth will continue to drive the stock and make it a good buy any time the stock pulls back a bit. MSFT is currently trading at $119.80 and analysts have an average price target of $138.29 on the stock.
Athletic goods and apparel maker Nike (NKE) hit a new record high in April, but the stock has pulled back 11% from its high. Nike does have China exposure due to its factories in the country, but it has been setting up factories outside China but still in the Asia Pacific region in recent years which has lowered its exposure more than its competitors. Trade tensions between the U.S. and China will weigh on the stock and create a good long-term buying opportunity as the stock will quickly once a trade deal is reached. Analysts see a lot of growth potential for the company with forecast annual earnings growth of 14% forecast for the next five years. A prolonged trade war could impact earnings growth, but eventually a trade deal will be reached, and Nike will quickly recover. NKE is now trading at $80.47 and analysts see the stock fairly priced at $91.10.
Discover Financial (DFS)
Credit card operator Discover Financial (DFS) is down 7% from its all-time high set in the first week of May. The recent pullback has lowered the stock’s P/E to just 9.5 and analysts expect the company to grow earnings at 12.6% per annum over the next five years. The strong expected growth will keep the stock moving higher, especially with the low valuation, and any pullback in the stock would be a good buying opportunity. The company delivered better than expected earnings in late-April which pushed shares to a record high, and once the overall market regains its footing buyers will quickly come back into DFS. The stock is currently trading at $76.94 and analysts see shares rising to $85.60.
Apple (AAPL) impressed last quarter with strong growth in its services where analysts see a rapidly growing revenue stream for the company that desperately needed to find a way to balance slowing iPhone sales. The stock was trending sharply higher before volatility hit the overall market as Apple does have a lot of exposure in China where it not relies on the nation for a lot of its production, but also counts on the people of China buying iPhones. However, the stock’s 15% pullback since the first week of May has shares trading at just 14 times future earnings. Tech giants are starting to face FTC probes, but Apple may come out ahead of the competition as it has been more successful in protecting data and privacy. China is important to the company, and you can expect the stock to be volatile while trade negotiations play out, but once a deal is finally reached the stock will rebound and the current dip in the stock has shares priced at a very reasonable price. AAPL trades at $178.76 with an average price target of $214.23.