Trade war tensions appear to be cooling.

Over the last week, President Trump tweeted that he would delay U.S. tariffs.

“As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1.  Assuming both sides made additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement.  A very good weekend for U.S. & China,” he tweeted.

Chinese markets saw positive action, as well.

On Monday alone, the Shanghai Composite was up as much as 5.6%.  That was its biggest one-day percentage rally in nearly four years.

Should we see an end to the trade war, it would significantly help China.  After all, its economy has taken quite a beating with existing tariffs, which hit $200 million worth of goods.

An end to trade war frustrations could very well put an end to global slowdown fears, too.


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Opportunity No. 1 – Coca-Cola (KO)

We believe that most of the recent negativity has been priced into the stock.  It’s now technically oversold at its lower Bollinger Band (2,20) with oversold over-extensions on RSI, MACD, and Williams’ %R.  From here, we believe the stock could potentially refill its bearish gap around $50 a share. It doesn’t hurt that KO just increased its dividend to 40 cents from 39 cents or that it just authorized a new 150-million share buyback program.

Opportunity No. 2 – NIO Inc. (NIO)

We recommended this stock in the last few weeks when it was less than $8 a share.  It’s now at $10 where our interest has been piqued again. The stock was just introduced to a significant number of new investors after CEO William Li appeared on 60 Minutes. NIO is now also seen as an alternative trade to a stock like Tesla, which is struggling.

Opportunity No. 3 – Dropbox Inc. (DBX)

In recent days, the stock pulled back from $26.60 to $23.50 after an earnings issue.  While revenue and adjusted EPS beat forecasts, guidance on margins was lower than anticipated.  The company posted Q4 revenue of $375.9 million – up 23% year over year. Non-GAAP earnings were up three cents a share to 10 cents. “Our healthy top line growth and free cash flow generation reflect our strong business model,” said Dropbox CEO Drew Houston.

Unfortunately, the company disappointed with the outlook on its operating margins.  It now expects for its non-GAAP operating margin to fall between 7% and 8%, which is below analyst expectations for 12.1%.  However, that accounts for integration and synergy investments into a recent HelloSign acquisition. The gap lower is an overreaction in our opinion.  It’s a situation where it’s best to buy the dip and wait for further upside.

From last week’s watch list:

  • Goldcorp (GG) closed at $11.13 on February 22, 2019.  It currently trades at $10.60. We have a near-term price target of $15.
  • HUYA Inc. (HUYA) closed at $23.75 on February 22, 2019.  It currently trades at $25.79. We have a near-term price target of $30.
  • AbbVie Inc. (ABBV) closed at $80.02 on February 22, 2019.  It currently trades at $79.41. We have a near-term price target of $85.