Some Fund Managers See Opportunities for Investors From Trade Dispute -- Journal Report

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)

Skyworks Solutions (NASDAQ:SWKS)
Historical Stock Chart
From Mar 2024 to Apr 2024