Drilling down from those headline numbers, exported products totaled US$21.953 trillion in 2021 up 25.5% from 2020. Services comprised an additional $5.2 trillion worth of global sales for items such as delivery transportation, telecommunications charges, and commercial support activities.
With so many businesses profiting from international trade, it can be extremely challenging to navigate through the weeds to uncover individual stocks offering superior long-term potential for value and growth.
Easy-to-Use Stock Analysis Tool
We turned to a user-friendly software product called Stock Unlock to help evaluate potentially solid stocks that should benefit from the strongest trends in international trade.
Note that Stock Unlock offers a free trial so that new users can explore its many features at their own pace.
The Insights tab is one of Stock Unlock’s most popular features since it quickly analyzes business fundamentals plus its industry information. The Insights tab scores the fundamentals of the stock so you don’t have to dig through its financials. These include a company’s profitability, financial health, growth, and what analysts are saying about the stock. This critical information quickly shows you the good and bad on any stocks and empowers users to quickly come to their own conclusions to if they should buy or sell it.
Below, we applied a select few of Stock Unlock’s key metrics to do some preliminary research on six strategic stocks poised to benefit from current international trade trends.
1. Electronic Chips Leader
Electronic integrated circuits plus related components have become the world’s most valuable export as measured by total sales, ahead of exported crude oil, refined oil, cars, and mobile phones.
Broadcom (stock symbol AVGO) generates the bulk of its sales for its advanced wireless electronic circuits that optimize the performance of smartphones. Broadcom’s chips are also widely used in automobiles and international data centers.
Broadcom scores well on Stock Unlock’s profitability measures – most notably its free cash flow margin and cash conversion. Cash conversion identifies whether a company’s net income comes from actual cash profits coming into the business, allowing users to weed out possible non-cash accounting embellishments to the net income numbers.
Another positive is that Broadcom bought back 1.17% of its own shares as of the latest reporting period, thus rewarding shareholders by decreasing its shares outstanding. A lower share count accelerates EPS growth.
However, one red flag for Broadcom’s stock is that its book value has decreased by -12.43% year over year, suggesting that the company’s balance sheet is weakening.
2. Oil Exports Stock Candidate
Global shipments of crude oil and refined oil attracted the second and third-highest export revenues in 2021. However, energy stocks can be risky since oil prices are highly cyclical and hard to predict. Also, efforts to replace fossil fuels with more environmentally friendly energy sources remain a long-term political goal.
APA Corporation (stock symbol APA) is an example of an oil stock that is 31.6% correlated to West Texas Intermediate crude oil benchmark prices, according to Wayne Duggan of U.S. News & World Report.
APA Corporation scores relatively well on some critical Stock Unlock metrics. The company is a growth leader as measured by an increasing free cash flow and the expanding tangible book value. APA Corporation’s profit margins are also strong, with its latest free cash flow margin at 29.42% while APA’s cash conversion ratio is a healthy 96.3% portion of all net income.
APA Corporation’s returns are stellar. Its 23.8% score for return on assets shows that management has been relatively efficient in deploying company assets to produce profits.
The company has also bought back almost 10% of its own shares in the latest period, thus enhancing APA’s per share profitability.
Besides global economic headwinds and volatile oil prices, APA scores a current ratio of 1.1 for assets to liabilities which is historically low for the company. While a current ratio above 1 means that a business does have more current assets than current liabilities, APA’s current ratio could morph into a troubling red flag if that ratio continues to shrink.
3. Canada’s Emerging Transportation Star
Headquartered in Mississauga, Ontario, Cargojet (stock symbol CJT.to) is an airliner positioned to benefit from strong demand growth for the timely and dependable delivery of products.
Research analyst and a Stock Unlock founder, Daniel Pronk explains that Cargojet exclusively focuses on shipping products. Therefore, Cargojet is insulated from airport backups, delays and cancellations that plague passenger airlines that prioritize customer travel over cargo shipments. In addition, Cargojet has partnerships with major worldwide businesses dependent on product deliveries like DHL and Amazon.
“This company is seeing an increase in demand right now and, as the global ecommerce space continues to expand and online shopping continue to grow, Cargojet will continue to benefit from increased demand,” says Mr. Pronk.
He adds, “This is in especially true now that Cargojet is expanding its fleet to serve outside of Canada and is diversifying into international markets.”
Cargojet’s return on equity rates as very good with a 25.6% score on Stock Unlock, demonstrating that the transportation firm is relatively efficient at generating earnings from its assets.
On the downside, Cargojet is susceptible to slowing e-commerce demand especially if the global economy deteriorates and unemployment soars. Cargojet’s free cash flow has plummeted by 455%, partly due to the company’s accelerating capital expenditures and investments in expanding its business beyond Canada. This is unsurprising given that Cargojet plans to significantly grow its fleet from 34 to 50 aircraft.
Excluding the investments in growing the business, Cargojet claims they produce roughly $40 million dollars in free cash flow a quarter, or about $160 million per year (CAD).
Cargojet is still seeing strong growth despite the ecommerce slowdown as the business is focused solely on transporting goods and not passengers. With airports around the world backed up and flights being delayed and/or cancelled, many businesses are switching to Cargojet for transporting their goods. Passenger airlines priority is their passengers, Cargojets priority is making sure goods are shipped on time. Businesses are realizing that if they want their goods delivered reliably and on time, then they will have better outcomes with a business where this is its priority – Like Cargojet.
4. International Trade King of Containers
Danaos Corporation (stock symbol DAC) ranks as one of the world’s biggest independent owners of large-size containerships. Containerships are vessels specifically designed to deliver a myriad of products via international channels.
Based in Greece, Danaos charters its containerships at fixed rates to global liner companies, providing some protection against inflation.
The current price-to-book ratio for Danaos is 0.64 compared to the average 1.21 price to book for its shipping industry. Price to book is an indicator that may signal that a stock is undervalued, albeit further research is needed on the underlying root causes. Still, the average price to book for Danaos has been considerably lower at 0.48.
Danaos did post juicy profitability margins and enjoys a healthy free cash flow percentage equaling 57.8% of net income.
Although its revenues, free cash flow and tangible book value are currently growing, Danaos does face risks specific to its industry. An increase in countries’ trade protectionism or any reduction in the level of exported goods would adversely impact the company’s operational results, cash flows, and financial health.
Founded in 1963, Danaos’ aging fleet of containerships could result in greater operating costs. Danaos also faces substantial competition from other containership providers. These factors may constrain the company’s ability to expand sales as well as its profitability.
One subjective metric red flagged by Stock Unlock for Danaos is analysts’ opinion that projected earnings per share will fall by an average 23% next year.
5. Looking to the East for a Winning Chinese Stock
The People’s Republic of China is an international trade mecca, shipping US$3.362 trillion worth of products or 15.3% of the world’s export sales for 2021. China’s exported products resulted in 29% more revenues for 2021 compared to 2020.
Alibaba (stock symbol BABA) has expanded its operations to encompass cloud computing, digital media and entertainment. Yet Alibaba’s core business remains its gigantic e-commerce marketplace where consumers and businesses from around the globe can buy and sell products and services.
Alibaba’s stock price has been cut in half over the past 12 months, partly because of slowing revenues due to COVID lockdowns in China. There is also a persistent fear that the U.S. Securities and Exchange Commission may delist Alibaba shares from the New York Stock Exchange.
Nevertheless, Daniel Pronk is optimistic about Alibaba as a business and its strategic importance to China’s powerful economy in the decades to come.
Explains Mr. Pronk, “I still believe that, over the long term, China’s economy is going to grow. I believe that Alibaba is going to be one of the best businesses to own to get exposure from the growth in China’s economy over the next few decades.”
Stock Unlock metrics bear out that Alibaba is financially healthy. Alibaba’s free cash flow amounts to an impressive 228.5% of the company’s net income. The company also repurchased about 3% of outstanding shares, which in turn enriches Alibaba’s per-share profitability metrics.
Stock Unlock helped to uncover some red flags, such as Alibaba’s free cash flow declining by a hefty 47.8% and its mediocre 4.76% return on capital employed.
Time will tell whether Alibaba’s recent slowdown due to COVID-related constraints poses an insurmountable obstacle to its long-term success or is simply a short-term speed bump.
6. Mixed Signals from an Electric Cars Stock
International sales of exported cars were worth a total US$712.7 billion in 2021, up by 10.6% from 2020. Of that dollar amount, 8.4% was global export sales specifically for electric cars. The percentage of electric cars to all exported cars sold in 2021 is almost six times the 1.5% comparative percentage five years earlier in 2017.
Tesla (stock symbol TSLA) is the world’s biggest maker of electric vehicles by market value. As the leader, it is reasonable to think that Tesla will continue to benefit from the accelerating trend towards buying electric cars. Tesla also makes and installs solar energy generating plus energy storage products–both growing sectors.
While Daniel Pronk concedes that Tesla is a great company, he is also wary about Tesla’s current share price being too expensive. He worries that the stock carries a hefty premium based on how popular it is.
Reviewing Stock Unlock metrics, Tesla’s stock price does appear to be inflated. In the most recent period, the company posted a price to free cash flow of 138.7%, a price to book value of 26.7%, and a price to earnings ratio exceeding 100%.
Counterbalancing that argument, Tesla continues to shine with very good growth metrics including an increase to its free cash flow (up 165%) and a hefty gain to the company’s tangible book value (up 48%).
Another potential red flag is the fact that Tesla’s profitability metrics are not superlative. The company posted a free cash flow margin of 10.31%, down from its high of 11.12%. Stock Unlock also reveals that Tesla’s free cash flow margin is average; that is, not indicative of best of breed but simply in line with other companies’ metrics.
Research Resources Used In this Article
Danaos Corporation, Company Annual Report 2021.
International Monetary Fund, World Economic Outlook Database (GDP based on Purchasing Power Parity).
International Trade Centre, Trade Map Export Statistics.
Stock Unlock, User-Friendly Share Analysis Tool.
U.S. News & World Report, 7 Best Oil Stocks to Buy for Exposure to Crude Oil Prices by Wayne Duggan
YouTube, Daniel Pronk’s Narrated Educational Videos; Stock Unlock Platform Walkthrough.
Note that the information presented in this article is for educational purposes only. It is not intended to recommend or promote any company or related stocks. Rather, the goal of this educational content is to encourage audience members to further investigate the facts, evaluate both the risks and rewards, then make their own independent and sound decisions.