UBS compiled its list of companies “most at risk from President Trump’s trade war.”
I entirely agree that the present trend toward protectionism puts the listed companies at serious risk. But, my, we’re only talking the tip of the iceberg here!
To get a true feel for the macro risk we’re dealing with we can take a list like UBS’s, then consider the supply chains for each company featured; as there’s to be no doubt that the hit would ripple through each company’s network of suppliers, as well as customers.
Let’s take the top name on the list, for example, Rockwell Automation: UBS states that ROK’s “exposure to global capacity build-out, autos” fuels its risk. Suffice to say that if ROK is dangerously exposed to a trade war, it’s suppliers may find themselves hurting big time as well. Here are its top 14 suppliers (out of a total of 19):
Micron Technology
TTM Technologies
Analog Devices
Infineon Technologies
IBM
RPC Group
Capgemini
Microchip Technologies
Moog Inc
Semtech Corp
SMART Global Holdings
Sealed Air Corp
ANSYS Inc
Microsemi
How about one more from the list? Here are Deere & Co’s (John Deere) top 14 suppliers (out of 179):
UPS
Bridgestone
Hindustan Pertroleum
ZF Friedrichshafen
Cie Generale des Establissements Michelen
Cummins Inc
Tenneco Inc
Jabil Inc
Dana Inc
OC Oerlikon
Honeywell
Trelleborg AB
FANUC Corp
Anhui Zhongding Sealing Parts
Now imagine if I took the suppliers and looked at their respective supply chains! In fact, let’s do it with Micron Technology. Here are its top 14 suppliers (out of 52):
Lam Research
Applied Materials
Tokyo Electric
Powertech Technology
ASML Holding NV
KLA-Tencor
Amkor Technology
Plexus
Seagate Technology
BE Semiconductor
Siltronic AG
Hiroshima Gas Co
Simmtech Holdings
Simmtech Co Ltd
Of course we could take the suppliers of the suppliers, and suppliers of the suppliers of the suppliers, and the suppliers of the suppliers of the suppliers of the suppliers, and the (just kidding), and do the same search for them as well (oh, and I’m completely leaving out each firm’s main corporate customers).
Bottom line, we’re talking thousands upon thousands (if not all) of companies (the world over) that are/will be negatively impacted by actions that some folks incredibly claim will by some miracle enrich U.S. industry and consumers.
Here are the other 30 names on UBS’s list:
SPX FLOW
CNH INDUSTRIAL
ILLINOIS TOOL WORKS
PIER 1 IMPORTS
BED BATH AND BEYOND
BEST BUY
MACYS
KOHLS
GAP
CANADIAN PACIFIC RAILWAY
CANADIAN NATIONAL RAILWAY
EXPEDITORS INTERNATIONAL OF WASHINGTON
ITT
OLIN
LYONDELLBASELL INDUSTRIES
METHANEX
QUALCOMM
MICRON TECHNOLOGY
ADVANCED MICRO DEVICES
APTIV
VISTEON
DENBURY RESOURCES
MEG ENERGY
FRANKS INTERNATIONAL
ENSCO
NOBLE
FREEPORT-MCMORAN
AK STEEL
GERDAU
INTERNATIONAL PAPER
So we’re still waiting for cooler heads to prevail! Imagine, if/when they do, the potential for a huge upside pop in the market. Whether or not the resulting upside move is sustainable, however, will depend upon general conditions at the time.
For now, this is still a bull market.