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Jefferies Says Buy These 5 'Strong Buy' Blue-Chip Stocks With Massive Exposure to China Now
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Though the relationship the United States has with China is somewhat fractured these days, top U.S. companies continue to do business there due to the massive purchasing power of the Chinese consumer. That purchasing power may even increase as the country finally returns to normal after a long and difficult bout with COVID-19.
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In a new Jefferies research report, the quantitative team points out that while the S&P 500 is up 8% this year, five stocks have accounted for a stunning 60% of the index returns, and only 32% of the 500 stocks are outperforming the index, a level not seen since 1999. Given the growing fear of recession, as indicated by the ongoing inversion of the two-year Treasury note and the 10-year paper, the team is looking for stocks with wide structural moats that can survive a downturn in the domestic economy.
They noted this in the research report about current investment trends:
Value has firmly fallen out of favor amid the slow build-up of the US economic downcycle. As investors move from cyclicals to structural moats, market breadth has narrowed sharply. The demand for moats should only grow as the economy slows, and hence quality at a reasonable price and low volume remain key focus areas. Also, stocks with high China revenue exposure should have more upside given the growing desire to access China’s recovery through non-China stocks.
The following five top stocks were selected by the analysts, and all make sense for investors looking to take advantage of China’s reopening without buying companies that are based there. While these stocks are Buy rated at Jefferies, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Apple
It is almost hard to comprehend that this legacy technology giant makes up a stunning 39% of Warren Buffett’s Berkshire Hathaway portfolio. Apple Inc. (NASDAQ: AAPL) designs, manufactures and markets consumer electronics and computers, and it has developed its own proprietary iOS and Mac OS X operating systems and related software platform/ecosystem.
Revenues are principally derived from the iPhone line of smartphones, the Macintosh family of notebook and desktop computers, iPad tablets, iPod portable digital music players, and the Apple Watch. The company also realizes revenue from software, peripherals, digital media and services. The technology giant consistently has churned out new products, and the ongoing stream of new offerings continues to garner more consumer approval.
Shareholders receive a 0.56% dividend. Jeffries has a $195 price target on Apple stock. The $168.21 consensus price target is lower and close to the closing share price on Thursday of $168.41.
24/7 Wall St.Estee Lauder
Consumers have used this company’s products since the 1940s, and the company continues to have huge overseas and China exposure. Estee Lauder Companies Inc. (NYSE: EL) manufactures, markets and sells skincare, makeup, fragrance and hair care products worldwide.
The company offers a range of skincare products, including moisturizers, serums, cleansers, toners, body care, exfoliators, acne care and oil correctors, facial masks, cleansing devices, and sun care products. Its makeup products include lipsticks, lip glosses, mascaras, foundations, eyeshadows, nail polishes and powders, as well as compacts, brushes and other makeup tools.
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It also provides fragrance products in various forms, comprising eau de parfum sprays and colognes, as well as lotions, powders, creams, candles and soaps. Its hair care products include shampoos, conditioners, styling products, treatment, finishing sprays and hair color products, and it sells ancillary products and services.
Estee Lauder offers its products under the Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, Kilian Paris, Too Faced, Dr. Jart+, DECIEM and The Ordinary brands. The company sells its products through department stores, specialty-multi retailers, upscale perfumeries and pharmacies, and salons and spas, as well as its own and authorized retailer websites, third-party online malls, stores in airports and duty-free shops.
Investors receive a 1.07% dividend. The Jefferies target price is $280, while the consensus target is $289.85. Estee Lauder Companies stock closed on Thursday at $245.67.
Las Vegas Sands
With a huge presence in Macao, and growing gambling exposure in the United States this gaming giant is a very solid idea now. Las Vegas Sands Corp. (NYSE: LVS) develops, owns and operates integrated resorts in Macao and Singapore, including the Venetian Macao Resort Hotel, the Londoner Macao, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Marina Bay Sands in Singapore.
The Las Vegas Sands integrated resorts feature accommodations, gaming, entertainment and retail malls, convention and exhibition facilities, celebrity chef restaurants and other amenities.
The company posted solid first-quarter results earlier this month, with revenue that surpassed Wall Street estimates as March visitation levels accelerated gaming volumes, retail sales and hotel occupancy. Top executives noted that traffic is rebounding in Singapore and Macao, and it expects further improvement in travel and tourism spending from China and Hong Kong as airline and ferry capacity returns to normal.
Jefferies has set its price target at $69, and Las Vegas Sands stock has a consensus target of $69.99. The last trade on Thursday was for $62.22 a share.
24/7 Wall St.Nike
The athletic shoe and apparel giant is hugely popular in China and across the world. Nike Inc. (NYSE: NKE) designs, develops, markets and sells athletic footwear, apparel, equipment and accessories worldwide under the Jumpman, Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks.
In addition, Nike sells a line of performance equipment and accessories, comprising bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment and other equipment for sports activities under the Nike brand, as well as various plastic products to other manufacturers.
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The company markets apparel with licensed college and professional team and league logos, as well as sells sports apparel. Additionally, it licenses unaffiliated parties to manufacture and sell apparel, digital devices and applications and other equipment for sports activities under Nike-owned trademarks.
The company sells its products to footwear stores; sporting goods stores; athletic specialty stores; department stores; skate, tennis and golf shops; and other retail accounts through Nike-owned retail stores, digital platforms, independent distributors, licensees and sales representatives.
Nike stock comes with a 1.10% dividend. The $160 Jefferies target price is well above the $135 consensus target and Thursday’s close at $125.70.
24/7 Wall St.Nvidia
This top semiconductor company is expected to be a huge player in the artificial intelligence world. Nvidia Corp. (NASDAQ: NVDA) provides graphics and computing and networking solutions in the United States, Taiwan, China and elsewhere.
Its Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/Nvidia RTX GPUs for enterprise workstation graphics; vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building 3D designs and virtual worlds.
Its Compute & Networking segment provides data center platforms and systems for AI, HPC and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; cryptocurrency mining processors; Jetson for robotics and other embedded platforms; and Nvidia AI Enterprise and other software.
The company’s products are used in gaming, professional visualization, data center and automotive markets. It sells its products to original equipment manufacturers, original device manufacturers, system builders, add-in board manufacturers, retailers/distributors, independent software vendors, internet and cloud service providers, automotive manufacturers and tier-1 automotive suppliers, mapping companies, start-ups and other ecosystem participants.
Nvidia stock has a $300 price target at Jefferies. The $288.05 consensus target is closer to Thursday’s $272.26 closing share price.
These are five of the highest-profile stocks in the world with huge exposure not only in China but across the globe as well. With huge name and brand recognition, all these stocks make sense for long-term growth investors looking to add companies that should remain leaders in their sectors regardless of economic conditions.
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