Companies with a lot to lose in a trade war.

U.S. stocks have gotten rocked so far in May, and the primary catalyst for the sell-off is a breakdown of trade negotiations between the U.S. and China. Investors are bracing for the worst and stocks with heavy exposure to China are taking a pounding. However, for investors willing to ride out the near-term volatility in hopes the U.S. and China ultimately reach a deal, the May weakness could be an excellent buying opportunity in these seven stocks.

Next:Wynn Resorts (ticker: WYNN) Credit

(AP Photo/Vincent Yu)

Wynn Resorts (ticker: WYNN)

Wynn Resorts has two major resorts on the Las Vegas strip, but its primary source of revenue is Macau, China. In fact, about 73% of Wynn’s revenue comes from China, a higher percentage than any other U.S. company. Morningstar analyst Dan Wasiolek says Macau has an extended period of growth ahead of it long after a trade deal is reached. Since August 2016, Wynn has grown its room share of the Macau market from 6% to 9%. Morningstar has a “buy” rating and $168 fair value estimate for WYNN stock.

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Companies with a lot to lose in a trade war.

U.S. stocks have gotten rocked so far in May, and the primary catalyst for the sell-off is a breakdown of trade negotiations between the U.S. and China. Investors are bracing for the worst and stocks with heavy exposure to China are taking a pounding. However, for investors willing to ride out the near-term volatility in hopes the U.S. and China ultimately reach a deal, the May weakness could be an excellent buying opportunity in these seven stocks.

Wynn Resorts (ticker: WYNN)

Wynn Resorts has two major resorts on the Las Vegas strip, but its primary source of revenue is Macau, China. In fact, about 73% of Wynn’s revenue comes from China, a higher percentage than any other U.S. company. Morningstar analyst Dan Wasiolek says Macau has an extended period of growth ahead of it long after a trade deal is reached. Since August 2016, Wynn has grown its room share of the Macau market from 6% to 9%. Morningstar has a “buy” rating and $168 fair value estimate for WYNN stock.

Qualcomm (QCOM)

While about 65% of Qualcomm revenue comes from China, QCOM stock has not suffered from the trade war. In fact, the stock soared 48% year-to-date after the company announced a settlement with Apple (AAPL) related to multiple patent and royalty disputes. Analyst Abhinav Davuluri says the ramping of global 5G wireless networks starting in 2020 is a major opportunity for the company in the near term. Even after the big rally, a trade deal with China could be another catalyst. Morningstar has a “hold” rating and $80 fair value estimate for QCOM stock.

Broadcom (AVGO)

Broadcom generates 54% of its revenue from the China market, yet delivered impressive free cash flow in the first quarter. Semiconductor solutions revenue was down year-over-year in the first quarter, but Davuluri says Broadcom has a chance to recover lost market share with smartphone vendors Apple and Samsung (SSNLF) starting in the second half of 2019. Davuluri says Intel Corp. (INTC) is a more attractive semiconductor play for investors due to its wider competitive moat, but Broadcom stock looks more appealing following its recent pullback. Morningstar has a “hold” rating and $300 fair value estimate for AVGO stock.

Micron Technology (MU)

Like many other leading semiconductor stocks, Micron is attempting to navigate a difficult environment while convincing investors that better days are ahead in the second half of 2019. Revenue dropped 28% in the most recent quarter, but Davuluri says 2.5% growth in mobile revenue was a silver lining. Davuluri says Micron should continue to gain content share in mobile devices given a secular trend toward more storage and computing capacity. Micron generates 51% of its total revenue from China. Morningstar has a “hold” rating and $40 fair value estimate for MU stock.

Marvell Technology (MRVL)

Marvell has been scaling back its reliance on the hard disk drive business, but analyst Seth Sherwood says that hardware still accounts for a large portion of Marvell’s overall business. At the same time, Sherwood says it will be difficult for Marvell to compete with the likes of Intel and Broadcom, but Marvell will likely continue to generate impressive cash flow in coming years as an increase in global connectivity expands the demand for controllers. China accounts for 50% of Marvell’s total revenue. Morningstar has a “hold” rating and $21 fair value estimate for MRVL stock.

Texas Instruments (TXN)

Despite the cyclical slowdown in chip demand and the company’s 44% exposure to China, Texas Instruments reported solid first-quarter numbers. Overall revenue was down 5%, but demand for 5G infrastructure equipment drove 30% growth in communications equipment sales. Analyst Brian Colello says Texas Instruments is the gold standard among analog chip makers and should easily be able to navigate the current downturn. Historical cyclical downturns in analog chip demand suggest the market could begin recovering starting in the second half of 2019. Morningstar has a “hold” rating and $106 fair value estimate for TXN stock.

Maxim Integrated Products (MXIM)

Maxim is another leading high-performance analog chip maker with 38% of its total revenue derived from China. Colello says Maxim’s expertise in HPA chip design makes its market share easily defensible. He says added connectivity in industrial machinery and automobiles will drive revenue and cash flow growth for Maxim in the long term. With an aggressive buyback program and a 3.2% dividend yield, Maxim investors are also getting paid to wait out the cyclical downturn in demand and trade war fears. Morningstar has a “hold” rating and $55 fair value estimate for MXIM stock.

7 stocks with the most to lose in China.

Wynn Resorts (WYNN)Qualcomm (QCOM)Broadcom (AVGO)Micron Technology (MU)Marvell Technology (MRVL)Texas Instruments (TXN)Maxim Integrated Products (MXIM)1 of 10

Wayne Duggan, Contributor

Wayne Duggan has been a U.S. News & World Report contributor since 2016. He is an expert at ...  Read more

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