3 Unexpected Winners From Trump’s Tariffs

It’s “The Art of the Deal” vs. “The Wealth of Nations”…

Donald Trump’s impact on the stock market has been profound.

The President insists his tariffs will usher in a new era for America with re-shored factories, smaller trade deficits, and a revitalized heartland. However, the markets continue to see these tariffs as tools to gain leverage in trade negotiations rather than a fundamental rearrangement of the global economy. 

And, economists warn that these policies risk a catastrophic outcome by choking global trade, spiking inflation, and freezing corporate investment. 

Given this context, many investors are understandably confused. In today’s newsletter, we are going to discuss why these conditions are likely to persist, and where the major opportunities can be found amid this chaos. Then, we are going to identify 3 companies that offer significant amounts of safety while also providing exposure to long-term, secular trends.

Uncertainty Reigns 

The stock market reflects this confusion with price action resembling an EKG monitor. The S&P 500 dropped by more than 20% from mid-February to early April. Since then, it’s up 17% on optimism that trade deals will be struck and signs that the economy remains resilient.

Impressively, all of the losses since “Liberation Day” have been recovered. An unusual characteristic of this rally is that institutions are on the sidelines, while retail investors are eagerly putting money to work.



Given these conflicting signals, investors should remain cautious and mindful of risk given this overhang. 

One way to navigate these types of markets is to utilize an effective, quantitative ratings system like the Zen Ratings. The Zen Ratings have outperformed the S&P 500 for more than 2 decades with Strong Buy-rated stocks delivering an average annual return of 32.5%, easily outperforming the S&P 500’s average annual gain of 10.8%. 

During these markets, emotions can be your own worst enemy. However, these are the exact moments when sticking to your plan is necessary and important. This is why so many investors rely on a proven system that allows us to take advantage of the market’s wild swings rather than be victim to our own emotional swings.

Opportunity Amidst Chaos 

History shows us that the best opportunities emerge during these periods of chaos, when many investors’ actions become driven by emotions. These periods are often the best time to pick up stocks that benefit from powerful secular trends which are insulated from short-term economic and market developments.

Think about buying AI stocks during the bear market in 2022 or the companies that were involved in the smartphone boom in 2008. The volatility in markets provided opportunities to buy these stocks at significant discounts.

3 Top Picks

These 3 stocks are poised to benefit from powerful secular trends: 

1. Donnelley Financial Solutions (DFIN) 

Donnelley Financial Solutions (DFIN) provides software and solutions for companies to deal with financial regulation and compliance across the world. Major customers include publicly listed companies, mutual funds, investment firms, and financial advisors. Currently, 84% of revenues are domestically derived.

The company is largely insulated from tariffs given its business and domestic focus. The company benefits from secular trends like AI, digital transformation, and regulatory compliance. Many newer companies rely on DFIN and are able to have smaller headcounts in their compliance departments. 

In terms of the Zen Ratings, DFIN is in the top 10% of stocks out of our universe of 4,600 stocks and garners a Buy rating (B). B-rated stocks have produced an average annual return of  19.9%. 

Looking at the 7 Component Grades that shape that overall score, you’ll see that DFIN earns above-average marks for Financials, Sentiment, and Value.

In terms of Value, DFIN is a rare stock that is cheap but growing rapidly. A major factor in this is the company’s shift toward higher-margin services and products. (Here’s something you might like to know about value stocks.)

The company has a forward P/E of 12 which is significantly below the S&P 500’s forward P/E of 21, but its forecast to grow earnings by 36% over the next year. Perhaps for that reason, Sentiment is strong — over the next 5 years, analysts expect average annual earnings growth of 13%. 

2. Sprouts Farmers Market (SFM)

Sprouts Farmers Market (SFM) is a specialty grocery retailer known for its focus on fresh, natural, and organic products. Healthy eating and buying more organic products are secular trends which benefit SFM. This is reflected in recent earnings reports which show growth in foot traffic, same store sales, and revenue per transaction. Additionally, the company is in the midst of adding new locations.

In terms of tariffs, SFM is a winner as the company sources the bulk of its products locally and domestically. The company also offers better prices than many of its competitors in the organic and premium grocery space which gives it an advantage if economic conditions deteriorate. Additionally, grocery stores are one of the most defensive sectors in the market and tend to outperform during periods of volatility.

Adding to SFM’s appeal is that it's in the top 3% for Financials. The Zen Ratings model is also bullish on SFM given its overall Buy (B) Rating.

SFM is also a part of the Zen Investor portfolio. Each stock in the Zen Investor portfolio is hand-picked by 40+ year market veteran Steve Reitmeister, who uses a rigorous 4-step screening process to locate the highest-potential stocks. Click here to check out other stocks in the Zen Investor portfolio. 

3. AbbVie (ABBV)

AbbVie (ABBV) is another stock that is insulated from tariffs due to being one of the top pharmaceutical companies in the world with a focus on immunology, oncology, and neuroscience. The company’s top-line is unaffected by tariffs and benefits from secular trends like an aging population and increased government spending on healthcare.

The company is quite attractive with a forward P/E of 14.3 and a 3.4% dividend yield. Over the last decade, ABBV has averaged a 10% increase to its dividend payout. It has also proved resilient during the last 3 market drawdowns, outperforming by significant amounts. 

Wall Street is bullish as 13 of 16 analysts rate it a Buy or Strong Buy, with a $214 consensus target, implying 9% upside. ABBV also earns a Strong Buy (A) from the Zen Ratings with A-rated stocks averaging 32.5% annual returns since 2003, crushing the S&P 500’s 10.8%. Among 4,600+ stocks, it ranks in the top 1% for Safety due to the company’s consistency in cash flow, sales, earnings, and operational metrics.

Conclusion

In hindsight, these periods of chaos and confusion offer great entry points for stocks that are benefitting from powerful, secular trends. Consider adding the 3 stocks above to your free watchlist on WallStreetZen to be notified of price moves, analyst coverage, and more.

What to Do Next?

• 200 Stocks to Sell Now >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
• 2 New Stocks to Buy from Steve Reitmeister >

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