This Is the Best Stock for Trade War "Tantrums"
My favorite stock pick is NVIDIA Corporation (NASDAQ:NVDA).
The company recently posted an earnings beat that smoked analyst estimates.
Nvidia turned in non-GAAP EPS of $0.88 per share versus expectations of only $0.81 per share. Most of that was from gaming, which accounted for $1.05 billion in revenue versus just $930 million in expected top line numbers.
Critics charge that Nvidia does "big business" in China so it makes sense the company is being gutted by trade-war fears and what could be a cloud-driven slowdown.
Or… does it?
Nvidia derives about 20% of its revenues from China which means that 80% are not from China.
That's the real nugget here.
Nvidia is heavily involved in artificial intelligence which will continue to grow as the world becomes more digital. Applications include self-driving vehicles, robotics, data centers, and more.
Not many people realize this because they are so focused on China, but Nvidia is partnered with Toyota Motor Corporation ADR (NYSE:TM) and a key component to both the Constellation and Pegasus systems it provides. Daimler AG (DE:DAIGn) ADR (OTC:DMLRY) is also in the mix and, in case you're wondering, Tesla (NASDAQ:TSLA) isn't.
Further, Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN), and Google's parent company, Alphabet (NASDAQ:GOOGL) ALL use Nvidia chips to train their artificially intelligent programs. So, too, do more than 2,000 companies working on AI.
Nvidia also makes the best gaming chips out there. Most investors don't realize that the blocky-chunky graphics we grew up with have transitioned to smooth, movie-like quality today largely because of Nvidia. The company invented GPUs – Graphic Processing Units – in 1999 and has never looked back.
Neither of these markets are particularly glamorous, but they are both growing hand over fist.
The stock is bouncing along in the low-$150s at the moment, which is a great buy for savvy investors with the right perspective. Tactically speaking, though, I think we could see a final Chinese-trade-tariff-tantrum related drop under $135 that'll test January lows.
The best way to play that possibility is also one of my favorite Total Wealth Tactics, the LowBall Order.
I suggest entering a lowball order to buy shares of NVDA at $135 or less.
If this gives you pause, I understand. Stocks are all over the place, and that's scary, especially with the constant barrage of trivial data coming at you from every direction.
What you want to focus on – meaning give your undivided attention to and focus on – is deceptively simple.
Market history shows that the biggest profits are handed to those who wade into the world's best companies at the worst possible moment…
- … Warren Buffett regularly buys into markets others fear and specializes in companies where the prevailing wisdom is often wrong. And, he's worth roughly $84.7 billion.
- … The legendary Jim Rogers is noted for taking the opposite side of "the trade." He and co-partner George Soros famously ran the Quantum Fund up a staggering 4,200% over the course of ten years versus only 47% from the S&P 500 by doing just that.
- … The late Sir John Templeton famously bought $100 worth of each stock trading below $1 in the New York and American stock exchanges on the eve of WWII, selling them for nearly four times as much after four years. Every $10,000 invested with his Templeton Growth Fund, Inc. Class A since inception in 1952 would be worth $12,403,812.74 today.
In closing, let me leave you with a final thought.
Any Chinese trade deal – no matter how "good" or how "bad" it actually is – has the potential to create an upside move that is going to make your head spin.
Buying Nvidia at these levels when very few people can see that outcome because they're distracted could be one of the savviest and most profitable moves you make.
Ever.