Who says there are no winners in the trade war between the U.S. and China? With Chinese economy expected to be resilient during negotiation period, we expect the Chinese will respond to the trade war by increasingly spending money on products made in their own country, eschewing foreign goods when possible. Also, we must not forget China remains an important manufacturing hub for the West.
The strong performance underscores the need for investors to position for China’s citizens to look inward as the U.S. and China trade war has sparked a nationalistic fervor. We also believe that wearable devices manufactured in China will continue to thrive in the near future. Here are 2 stocks we think that it will be a good addition to your portfolio.
# 1 Netflix (NASDAQ: NFLX)
Viewers Really Love The Content From Netflix
Investors worry that Netflix is losing Disney content as well as popular shows like “Friends” and “The Office.” But Netflix subscribers will take it in stride. “People focus on these shows as the core of Netflix content, but that has never been the case,” says Alexandra Cowie, a media analyst with Gabelli Funds who is bullish on Netflix.
Yes, “The Office” and “Friends” are regularly top shows. But six of the 10 most viewed titles recently were original Netflix content, points out Cowie, including “House of Cards,” “Narcos” and “The Haunting of Hill House.” None of the top 10 was from Disney. Around 80% of millennials think Netflix has the best original content, says Cowie, citing data from Convergence Research Group.
Keep in mind that despite the loss of Disney, Netflix will still have lots of third-party content from major studios including Sony and Paramount as well as the CW Television Network, notes Morgan Stanley analyst Benjamin Swinburne. “Not every studio can or will go direct-to-consumer,” he says.
Netflix Can Flex Their Financial Capability When It Comes To Buying New Content
Disney is perceived as a big threat, but Netflix really has it beat in terms of spending power. Last year, Netflix produced $15.8 billion in revenue, growing to $20 billion this year, points out Charles Lemonides, chief investment officer of the hedge fund ValueWorks. In contrast, Disney’s studio entertainment division brought in $10 billion in revenue in 2018 and isn’t growing rapidly. The upshot: Netflix has a lot more money to spend on scripted content.
The advantage is bigger than it seems because so much of Disney’s content spend gets sucked up by big-budget projects, not an area where Netflix competes. “So Netflix has more money to spend on the next ‘Orange is the New Black,’ ” says Lemonides.
#2 Luxshare Precision (2475.SZ)
Luxshare Precision to double monthly production of AirPods Pro despite trade war
Luxshare Precision (2475.SZ), a Chinese designer and manufacturer, is expected to increase monthly production of AirPods Pro to 2 million units per month. In addition, it is believed that Apple have asked Goertek, a Chinese acoustic components company, to boost production at its factories in Vietnam to help Apple reduce the cost of purchasing parts.
In the wake of this story breaking, the stocks of both Chinese suppliers rose, with Luxshare Precision experiencing a 3.84% increase. Despite the ongoing trade war between China and the United States, it appears that Apple is still comfortable strengthening its cooperation with Chinese companies.
Apple wearable devices is now an important growth driver amid saturated smartphone market
Apple is gradually adapting to the slowdown of demand for the iPhone in a saturated smartphone market. This has resulted in wearable devices such as AirPods and the Apple Watch becoming important growth drivers for Apple, with the AirPods series becoming Apple’s fastest-growing product line.
Luxshare Precision was founded in 2004 by Grace Wang, a former production line worker at Foxconn. Luxshare Precision entered the Apple supply chain in 2012 and became one of Apple’s parts suppliers. Since 2017, Luxshare Precision has started manufacturing AirPods and this year has won orders for the assembly of Apple Watch. Apple CEO Tim Cook has praised Luxshare Precision’s success as the realization of Apple’s “China Dream”.
#3 Alibaba Health Information Technology (241.HK)
Alibaba Health Information Technology is partly owned by Alibaba Group. The company is one of China’s largest online pharmaceutical platforms with more than 130 million annual active consumers.
For the year ended March 2019, the platform had gross merchandise volume of RMB 59.5 billion. Besides, sales from the company’s pharmaceutical e-commerce platform business almost quadrupled to RMB 690 million. The company has recently invested more in AI and hopes to launch more AI powered medical services in the future.