At least it's the same small group of stocks that actually trade on China, not the whole shooting match.
That's why I keep coming down to in this on-again, off-again situation between China and the United States, and how the market responds when President Donald Trump tweets "Getting VERY close to a BIG DEAL with China. They want it and so do we!"
I am not trivializing the importance of this tweet. The president usually tweets about how the Chinese want, and more important, need, a deal with us. He doesn't tweet that we want a deal.
So, the comments are noteworthy.
But the days where a China deal matters to the stock market are long since gone. That's because the stock market initially reacted to the tariffs as if they were going to cause a worldwide recession. Now, given the strength of the stock market and the economy, they are much more of an icing on the cake... or off of it.
What we saw Thursday, however, is emblematic of what's at stake if we give in to China, and either stave off the next round of tariffs or actually roll back some of them.
First, let's be very clear. What's at play here, what can go right, is an agreement that very specifically benefits some very big financial institutions, principally, JPMorgan Chase (JPM) , Citigroup (C) , Goldman Sachs (GS) , Bank of America (BAC) , American Express (AXP) , Mastercard (MA) and Visa (V) .
They all stand a chance to establish strong institutional entities that compete directly with Chinese ones and no longer have to be partners with them. Which ones are still worth buying?
I think they all can be bought, although JPMorgan's the most extended. I like American Express the most on a China deal, because of the cachet it would gain. I think you have 10 up and five down. That's a terrific risk-reward. Second would be Goldman Sachs, which needs to get some growth and hasn't been able to demonstrate it consistently. I would think that one has 20 up and 10 down. Visa and Mastercard could easily see their stocks rally 10% vs. only a couple percent down.
Again, all of these are excellent, with or without a deal. With they are spectacular.
Second echelon? Tech. Thursday morning we got a very discouraging note out of Credit Suisse about a possible 35% drop in Chinese iPhone sales. Plus, the note goes on, there could be as much as $67 tacked on to the cost of an iPhone here. Apple's (AAPL) stock was down more than two dollars when the president tweeted, but then rallied to unchanged before going back to where it was.
You get a China deal, and I am calling it 10 up or five down.
I have been adamant that you own a 5G internet-of-things stock. We get a deal, then you want to own Nvidia (NVDA) because it will be able to merge with Mellanox (MLNX) , which is immediately additive as that Israeli semiconductor company sews up the networking edge for Nvidia. It could rally as much as 10%. Traditional 5G players like Skyworks (SWKS) , Qorvo (QRVO) , Qualcomm (QCOM) and Marvell Technology (MRVL) can all see a 5% move up on something signed and sealed. I like Advanced Micro Devices (AMD) so much, but it shot up big Thursday, stealing from any gain off a deal.
I think there is way too much wagered on some traditional cyclicals like Caterpillar (CAT) , Honeywell (HON) or Cummins (CMI) . Their numbers will go up, but I don't want to go crazy for them. Boeing (BA) would go from $350 to $400 if they could fix the MAX, but it sure sounds like they can't.
But you know what will have a run, even as it shouldn't?
Energy. I think that the machines that determine so much pricing are set to buy energy stocks if there is a deal and sell them if there isn't. Write these down: Schlumberger (SLB) zooms on a deal and Chevron (CVX) , Exxon (XOM) and BP (BP) could catch a 5% move.
Now, let's really drill down. Both Hasbro (HAS) and Mattel (MAT) have been trying to diversify away from Chinese manufacturing. Mattel is further along than Hasbro is. Both stocks borrowed from a deal Thursday with excellent moves. But they aren't done. We just talked with both companies. Hasbro, I could see rallying 10%. Mattel? I like it for as much as 25%. That's how important it would be.
Retail's a winner. Dollar Tree's (DLTR) been the most hobbled; it goes up the most. Home Depot's (HD) been trashed, it can have a nice rally. So can Walmart (WLMT) and Target (TGT) ? The good thing? There's not a lot of upside built in to any of these. They really seem attractive to me. Two trades with little conviction: Macy's (M) and Kohl's (KSS) . The former has numbers that are most likely too high, the latter needs momentum from the Amazon (AMZN) return deal I have talked endlessly about. Best Buy (BBY) and Footlocker (FL) have the most exposure to the December tariffs that might be postponed. BBY had a terrific quarter anyway. Footlocker has more risk because it's been struggling with mall traffic.
Nike (NKE) was never in trouble, but there are always shorts swimming around it because of how important China is. They report next week; I expect a good number. A deal's problem worth 10%. Not much downside given the strength of the business.
Starbucks (SBUX) was never "in trouble" in China, either. I have liked this story every since Kevin Johnson came "Mad Money" at the U.S. Air Force Academy and said he wanted to back up the buyback truck at $83. It's up about five bucks from then, but JP Morgan which downgraded the stock at its high of $99 not that long ago went back to a buy today so it has more room.
I know it's at its high, but you still have to love Las Vegas Sands (LVS) , the casino company with a huge presence in Macau. A four-point, 5% yield cushions the downside.
Transports? First FedEx (FDX) , which caught an upgrade from Sell to Neutral at UBS is the one that's most hurt, so it will be the one most helped. Union Pacific (UNP) has the best exposure to China of all the rails.
Finally, some odd-ball ones. Waste Management (WM) used to sell a lot of waste to China. The trade war stopped that. The stock does not reflect any good news on that front. Kimberly Clark (KMB) does a huge diaper business in China. It yields 3%, not a lot of downside. Stanley Black & Decker (SWK) makes a lot of goods in China, but it was up six points Thursday in advance of good news.
I have said it before and I will say it again: I think the best way to invest in a trade deal is to presume one won't occur. Now, however, the president's tweet assures us that something that will please Wall Street could occur. I'm giving you this list because people keep demanding it of me on Twitter. The list seems long, but you have to understand there are hundreds and hundreds of stocks that a deal would be meaningless for. Those are the ones I have been emphasizing both here and with the Actionalertsplus.com club. I have little faith that China will do anything other than buy pork, because the nation needs it and say they won't steal intellectual property,
Now you have the list. It's a total caveat emptor opportunity and not one I would avail myself of; way too much trading. Still, it's as comprehensive as you are going to get anywhere and it's yours to decide.