I'm LongbridgeAI, I can summarize articles.Trump's aggressive tariff proposals, including threats of up to 70%, have created uncertainty in equity markets. Amid this, investors are advised to consider Coca-Cola and Netflix as resilient stocks. Coca-Cola benefits from a strong domestic manufacturing presence, a diversified product portfolio, and a long history of dividend increases. Netflix, insulated from tariffs due to its subscription model, continues to show strong financial growth, although its high valuation may lead to volatility. Both companies are positioned well for long-term investment despite potential economic challenges.
Trump's trade agenda has rocked and shaken equity markets this year. It's been a bit of a roller-coaster ride, and although stocks have somewhat recovered from the beating they took earlier this year due to the president's proposed tariffs, we are not out of the woods just yet. Trump is still pushing aggressive tariffs -- he recently threatened to impose some as high as 70% on various countries. Amid all this uncertainty, it's worth it for investors to buy shares of companies that the president's trade policies won't significantly harm.
No company can entirely avoid the impact of tariffs, but some will handle them better than others. Coca-Cola (KO 0.20%) and Netflix (NFLX -0.40%) are among the corporations that are likely to fare better than most in a higher tariff environment. Here's what investors need to know.
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1. Coca-Cola
Coca-Cola is one of the most recognizable brands globally. The beverage specialist has operations in practically every country. The company bypasses tariffs on imported goods due to its significant manufacturing footprint in most regions where it operates. As the company's CEO, James Quincey, recently said: "The vast majority of everything that's consumed in the U.S. is made in the U.S."
Although it still imports parts and materials used in its manufacturing process (most companies do), some of which will be subject to tariffs, Coca-Cola is better positioned than most. This aspect of Coca-Cola's business partly explains why it has outperformed the broader market this year.
Furthermore, investors may also be drawn to the company due to its position as a leader in the consumer staples industry. Companies in this field are generally resilient during economic downturns.
As some fear that the Trump administration's trade policies might lead to economic troubles, companies like Coca-Cola appear more attractive. That said, investors shouldn't worry too much about what might transpire in the next year or so. The good news is that there are excellent reasons to invest in Coca-Cola for the long term. Let's consider three of them.
First, the company has a strong moat thanks to its brand name. The Coca-Cola logo inspires confidence and attracts consumers in both good times and bad, resulting in somewhat consistent revenue and earnings. Even when Coca-Cola's financial results take a hit -- as they did during the early pandemic years -- the company's robust underlying operations mean that it can survive the ordeal and perform well long after the dust has settled.
Second, Coca-Cola has a deep and diversified portfolio of drinks and smaller brands across nearly every major category. And thanks to a successful business and the strong cash flow it generates, Coca-Cola has the flexibility to adapt its portfolio according to changing tastes and preferences.
Third, Coca-Cola is an excellent dividend stock. The company has increased its payouts for 63 consecutive years and currently offers a forward yield of 2.9%. The S&P 500's average is 1.3%.
Buying shares of Coca-Cola to help strengthen your portfolio right now as the tariff situation evolves would be a good move, but the company's long-term returns, especially with dividends reinvested, should be strong as well.
2. Netflix
Netflix's main product is a subscription to its streaming platform. There are no imported goods to worry about here and no tariffs. While Netflix may still suffer the consequences of the current administration's trade policies -- for instance, if they lead to a recession -- the company's core business is largely insulated from the effects of tariffs. Meanwhile, Netflix continues to deliver outstanding financial results.
In the first quarter, the company's revenue increased by 12.5% year over year to $10.5 billion, while its net earnings per share (EPS) came in at $6.61, which was 25.2% higher than the year-ago period. Netflix is projecting top- and bottom-line growth rates of 15.4% and 44.1% for Q2, surpassing its most recent quarterly update.
However, some might argue that the company's success is already baked into its share price. Netflix trades at 52 times forward earnings. The average price-to-earnings (P/E) multiple for the communication services industry to which it belongs is 19.9. That might make the stock somewhat volatile if it fails to match The Street's expectation, but the company remains a solid long-term buy.
Netflix is the leader in streaming, and although the industry has made significant headway over the past decade, there is still plenty of whitespace ahead.
For instance, in the U.K., Netflix grabbed 9% of television viewing time in Q1, leading all streaming companies, which, together, accounted for only 33% of television viewing time in the country. Netflix will benefit as streaming viewing time and engagement grows, leading to more subscribers, higher ad revenue (a business that is still in its early innings for Netflix), and more data to direct its content-production strategy.
The basic blueprint that enabled Netflix's success in recent years should continue yielding strong results and returns for the stock. Tariffs or not, investors can safely buy and hold this stock for a long time.