At the beginning of 2020, the trade war between the U.S. and China threatened to throw the stock market into another deep decline.
But both sides finally agreed to cut some tariffs on Chinese goods in exchange for China buying more American goods and services.
Over the next two years, China agreed to increase purchases of American goods by $200 billion.
For context, China spent around $190 billion on U.S. goods in 2017. Now, that figure is supposed to be around $290 billion each year.
COVID-19 put a dent in that deal. But the big challenge is transporting those goods across the Pacific Ocean.
By now, you likely know that my colleague Charles Sizemore is an income expert. And our Chief Investment Strategist Adam O’Dell designed the Green Zone Ratings system.
This stock is the best of both worlds: It pays an annual dividend of more than 2%, and its rating is “strong bullish.”
The company helps transport goods to and from areas including China and the U.S.
You see, global trade will only get bigger in the years to come.
Trade With China Is Big Business
Close to $50 billion in goods flows between the U.S. and China every month.
This ranges from cars and soybeans to aircraft and microchips.
According to the Federal Reserve Bank of St. Louis, the share of those exports going to China has “increased sharply.”
The recent trade agreement aims to increase those exports even more to balance out what the U.S. brings in from China. (Think machinery and toys).
U.S.-China Trade On the Rise
As you can see, trade between the U.S. and China took a dip in February and March because of the coronavirus, but it has started to get back to 2019 levels.
Factoring in the latest trade agreement, those monthly figures will rise.
And someone needs to be able to transport those goods and services between China and the U.S.
Using Adam’s system, I’ve found a company that does just that … with the potential to outgain the market by three times!
Matson Inc. Owns the Shipping Lanes
Founded in 1882, Matson Inc. (NYSE: MATX) is one of the oldest shipping companies in the world.
The company offers ocean freight transportation in the Pacific Ocean that includes an expedited service between China and the Port of Long Beach in California.
Since hitting a low of $24.76 per share in March 2020, Matson Inc. stock has rebounded by 65%.
Matson Stock Shows Upward Trajectory
In its quarterly earnings report from Aug. 5, Matson reported a 77% increase in its earnings per share as the China-Long Beach business offset weaker performing sectors.
MATX’s annual dividend yield is 2.28%. On August 5, the company’s board approved a dividend payout of $0.23 per share — an increase from the $0.22 per share it approved in May.
It’s the fifth straight year the company has raised its dividend payment to investors.
In addition to its healthy dividend, this company is set for massive share price appreciation.
Adam’s Green Zone Ratings system scored Matson Inc. stock a 92 overall — meaning we see it crushing the market by three times over the next 12 months.
The company rated high on value (91), growth (87) and quality (82).
Let’s take a closer look at the data:
- Value — The company earned a 91 on value. Matson has strong price-to-cash-flow, price-to-earnings and price-to-sales, making its valuation low compared to the rest of the cargo transportation industry. Adam knows that low valuation stocks tend to outperform stocks with high valuation.
- Growth — The company’s sales were $2.1 trillion, and its trailing 12-month income is $88 million, adding to the rating of 87 on growth. Additionally, the company reported a 77% increase in earnings per share.
- Quality — Matson’s returns on assets, equity and investment all beat the rest of the industry. Its operating cash flow is strong, at $377 million. Its debt ($1.1 trillion) is a little high, which gave it a rating of 82 on quality.
What to Do With Matson Inc. Stock
With an overall score of 92 — meaning only 8% of all other stocks rated are better — we are strong bullish on Matson Inc. stock.
That dividend yield only sweetens the deal.
As exports from the U.S. leave for China, Matson will be one of the primary companies getting the product from Point A to Point B.
Matson’s express service between China and the Port of Long Beach in California makes it one of the strongest players in the shipping industry.
We see Matson outperforming the rest of the market by three times over the next 12 months.
The bottom line: The need for quick, reliable shipping of goods between the U.S. and China will intensify as China increases its purchase of American goods and services. Get in on this shipping giant now, and watch Matson blow away the market.
Until next time…
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.