The protracted trade war between the United States and China finally seems to be easing. After imposing higher rounds of tariffs on each other, both countries had agreed on a phase one deal in October. But, geopolitical tensions like the pro-democracy protest in Hong Kong and U.S. Congress’ bill to support protestors in Hong Kong kept trade deal uncertainties looming.

However, positive developments over the weekend have induced fresh hopes on the phase one deal completion,helping the stock market gain traction.

U.S. –China to Reach Phase One Trade Deal Soon

In the beginning of October, both the United States and China had agreed to sign a phase one trade deal soon. This news, along with the United States halting tariff hike on Oct 15 and China agreeing to buy more agricultural produce, kindled hopes for investors. Since then, every other day, certain news either spooked markets or gave fresh hopes.

However, the U.S. administration has scheduled a tariff hike on Dec 15, which will be imposed if the deal makes no progress. Additionally, the U.S. Senate and House had passed a bill to protect human rights in Hong Kong on Nov 20, and that instantly made China condemn the United States for interfering in their domestic affairs.

Despite the foresaid events, China’s chief trade negotiator, Liu He has invited the U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing for trade negotiation. Further, the U.S. national security advisor Robert O’Brien on Nov 23 said that the phase one deal “could happen” by the end of this year.

The Chinese administration reported that they will raise penalties on violations of intellectual property rights. This has been one of the sticking points in the U.S.-China trade talks and the latter is making an attempt to address the issue.

Along with these positive developments over the weekend, China’s Ministry of Commerce said that the United States and China held a telephone conversation on Nov 26, wherein Liu He and Robert Lighthizer along with Steven Mnuchin discussed how to address respective concerns and reach terms of agreement. Both countries’ representatives agreed to make further communication on matters related to the phase one trade negotiations.

Our Top Picks

Companies with exposure to the Chinese economy, either for sales or purchase of goods or finished products, have been affected by the higher and retaliatory tariffs. Given the positive developments and possibilities of a phase one deal before the year ends, we have shortlisted five stocks that are poised to gain as the trade war eases. These stocks flaunt a Zacks Rank #1(Strong Buy) and Growth Score  of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

NeoPhotonics Corporation NPTN is a publicly traded company that develops, manufactures and sells optoelectronic products that transmit, receive and switch high-speed digital optical signals for communications networks. The company’s expected earnings growth rate for the current quarter is 100% compared with the Semiconductor - Communications industry’s estimated earnings decline of 30.8%. The Zacks Consensus Estimate for current-year earnings has improved nearly 100% over the past 60 days.

DexCom, Inc. DXCM is a publicly traded medical device company focuses on the design, development, and commercialization of continuous glucose monitoring systems in the United States and internationally. The company’s expected earnings growth rate for the current year is more than 100% compared with the Medical - Instruments industry’s estimated earnings growth of 11.8%. The Zacks Consensus Estimate for current-year earnings has improved 52.1% over the past 60 days.

PC Connection, Inc. CNXN is a publicly traded information technology company that offers IT products, including computer systems, software and peripheral equipment, networking communications, and other products and accessories. The company’s expected earnings growth rate for the current year is 28.7% compared with the Retail - Computer Hardware industry’s estimated earnings growth of 19.3%. The Zacks Consensus Estimate for current-year earnings has improved 11.7% over the past 60 days.

Cardtronics plc CATM is a publicly traded company that provides automated consumer financial services through its network of automated teller machines and multi-function financial services kiosks. The company’s expected earnings growth rate for the current year is 12.2% compared with the Financial Transaction Services industry’s estimated earnings growth of 9.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.5% over the past 60 days.

Unifi, Inc. UFI is a publicly traded company that manufactures and sells recycled and synthetic products made from polyester and nylon in the United States, Brazil, China, and internationally. The company’s expected earnings growth rate for the current year is more than 100% compared with the Textile - Products industry’s estimated earnings growth of 22.6%. The Zacks Consensus Estimate for current-year earnings has improved 3.5% over the past 60 days.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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