Stocks to Buy as New Tariffs Take Effect

February 1, 6:33 am

With the recent announcement of significant tariffs on key trading partners such as Canada, Mexico and China, investors are keeping a close eye on companies that might benefit from a shift toward domestic production. In this article, we take a closer look at three publicly traded companies - Nucor Corporation (NUE), Caterpillar (CAT), and Cummins (CMI) - and examine how they are set up to benefit from the new tariffs along with some encouaring alternative data insights.

Nucor

Nucor (NUE) is currently trading at $128.43 with a market cap of $38.2B. Despite a decline of 28.9% over the last year, the stock has seen a recent recovery of 5.1% in the past week, and it offers a dividend yield of 1.8%.

With tariffs making imported steel more expensive, Nucor stands to benefit as domestic producers gain pricing power. Higher steel prices can improve margins for companies like Nucor that operate primarily in the United States. The ongoing focus on reshoring manufacturing and reducing dependency on foreign imports directly supports Nucor’s competitive position.

Alternative Data Insight: Employee reviews at Nucor reflect a generally positive business outlook. Although sentiment has slightly dipped over the past couple of months, the underlying optimism remains strong and has historically correlated with future stock price improvements.

Caterpillar

Caterpillar (CAT) is trading at $371.44 with a market cap of $181B. The stock has increased by 19.6% over the past year but fell by 8.9% in the last week.

As a leader in heavy machinery, Caterpillar benefits when domestic production is emphasized. Tariffs are likely to increase the cost of imported parts and equipment, which can shift demand toward U.S.-based manufacturers like Caterpillar. Its strong domestic operations and exposure to infrastructure spending support the case for the stock as an attractive buy.

Alternative Data Insight: LinkedIn data shows that Caterpillar’s workforce has grown by 10.6% over the past year. This significant increase in employee count is a strong indicator of the company’s expansion and its capacity to handle increased domestic demand.

Cummins

Cummins (CMI) is currently trading at $356.25 with a market cap of $49.3B. The stock is down 3% over the last week but has surged by 49% over the past year, and it offers a dividend yield of 2.02%.

Cummins is well-known for its high-quality engines and power systems, which benefit from a strong domestic manufacturing base. With tariffs likely to raise costs for imported components, companies like Cummins that rely on domestic production stand to gain. The strong year-over-year performance, combined with an established market presence, makes Cummins a compelling option in a tariff-driven environment.

Alternative Data Insight: Sentiment analysis across platforms such as Reddit, StockTwits, and Tipranks shows a predominant bullish view on Cummins. This strong positive sentiment among investors reinforces the stock’s potential as companies move to secure domestic production channels.

Key Reasons to Consider These Stocks with the New Tariffs

With the implementation of new tariffs, domestic production is poised to become a major beneficiary of reshoring trends, and each of these companies is uniquely positioned to take advantage of this shift. Nucor, for instance, is likely to see improved margins as higher steel prices make its domestic production more competitive, further supported by positive employee sentiment that bodes well for future performance. Similarly, Caterpillar stands to benefit from increased domestic demand as tariffs drive up the cost of imported machinery and parts, and its significant workforce growth indicates robust internal confidence and capacity for expansion. Cummins, with its strong market performance and solid domestic manufacturing base, is set to gain from reduced exposure to tariff-induced cost pressures, a notion bolstered by bullish investor sentiment online.

Moreover, all three companies offer attractive dividend yields - a particularly important consideration in volatile markets - providing investors with a steady income stream that can cushion the impact of short-term market fluctuations caused by trade policy changes.

The Take-Away

The introduction of new tariffs is driving a renewed focus on domestic production, offering potential upside for companies like Nucor, Caterpillar, and Cummins. Each stock demonstrates unique strengths and attractive dividend yields provide an additional income benefit, making these stocks even more appealing as part of a diversified investment portfolio. However, while these companies show considerable promise, investors should remain mindful of the inherent risks: tariffs and trade policies can trigger short-term market volatility, and global supply chains may still face disruptions or retaliatory measures, impacting overall cost structures and stock price performance.

Disclaimer: The information provided is for educational and informational purposes only and should not be construed as financial or investment advice. All investments involve risk, and you should conduct your own research or consult a qualified professional before making any investment decisions.

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