Some Fund Managers See Opportunities for Investors From Trade Dispute -- Journal Report
June 09 2019 - 10:31PM
Dow Jones News
By Tanzeel Akhtar
The U.S.-China trade dispute and American sanctions on Huawei
Technologies Co. are affecting share prices around the world. So,
should fund investors look for opportunities to profit from the
situation?
Some fund managers think they can provide those opportunities by
picking up shares that have been beaten down to more enticing
prices. Ben Phillips, chief investment officer of EventShares, a
New York-based ETF sponsor and investment manager, says the firm
has bought shares of four semiconductor makers whose stocks have
been hit by U.S.-China tensions: Xilinx Inc., Skyworks Solutions
Inc., NXP Semiconductors NV and Broadcom Inc. All four stocks were
"previously at what we viewed as expensive valuations," he
says.
Kip Meadows, chief executive of Nottingham, a
fund-administration firm based in Rocky Mount, N.C., says the trade
tensions have created opportunities for companies around the world
-- and for investors to benefit if those companies can expand their
businesses.
"The largest potential impact may be manufacturing shifts back
to the U.S., or more probably to other Asian economies like
Vietnam," Mr. Meadows says. "The U.S. demand for electronics,
various forms of industrial machinery, furniture and the low end of
our economy -- toys, plastics, games -- has been served by China.
Those supplies will move elsewhere. The savvy investor can
determine where."
Others are more skeptical of investors' chances to profit from
trade tensions. "I think that all the brouhaha around so-called
trade wars presents investors with an opportunity to remind
themselves just how counterproductive tinkering with their
portfolios in response to the headline risk du jour can be," says
Ben Johnson, director of fund research at Morningstar Inc.
The idea that investors can exploit any opportunities that might
arise assumes that they know how the markets will respond and how
current tensions will be resolved, and that market prices don't
already reflect any of what will happen.
"Finding an ETF that might benefit is more difficult still, and
the ones that could fit the bill -- those offering exposure to
semiconductor, industrial and rare-earths equities -- are very
narrow and volatile," Mr. Johnson says.
Staying out of the dispute might be a better bet, says Todd
Rosenbluth, senior director of ETF and mutual-fund research at
CFRA: "U.S.-centric sectors like real estate and utilities are good
places to invest to avoid the trade-dispute-related volatility and
earn appealing dividend income as well." He says Vanguard Real
Estate ETF (VNQ) and Utilities Select Sector SPDR ETF (XLU) "offer
diversified, low-cost exposure to these sectors."
Ms. Akhtar is a writer in London. She can be reached at
reports@wsj.com.
(END) Dow Jones Newswires
June 09, 2019 22:16 ET (02:16 GMT)
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