What Happened?
A number of stocks fell in the afternoon session after the U.S. threatened to impose "massive increases" to tariffs on China in response to new export controls from Beijing.
The potential countermeasures follow China's decision to place new restrictions on the export of strategic minerals and related products, including rare earths, which are critical for the defense, semiconductor, and manufacturing industries. This escalation in the economic competition between the two largest global economies is fueling investor anxiety. The new tariff threats raise concerns about disruptions to global supply chains, increased material costs for manufacturers, and a potential drag on an already sluggish economy. Industrial companies are particularly sensitive to these developments as they are often cyclical and heavily reliant on international trade.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Inspection Instruments company Keysight (NYSE: KEYS) fell 5.3%. Is now the time to buy Keysight? Access our full analysis report here, it’s free for active Edge members.
- Construction Machinery company Manitowoc (NYSE: MTW) fell 4.9%. Is now the time to buy Manitowoc? Access our full analysis report here, it’s free for active Edge members.
- Electronic Components company Vicor (NASDAQ: VICR) fell 5.2%. Is now the time to buy Vicor? Access our full analysis report here, it’s free for active Edge members.
- Infrastructure Distributors company MRC Global (NYSE: MRC) fell 4.4%. Is now the time to buy MRC Global? Access our full analysis report here, it’s free for active Edge members.
- Electrical Systems company Sanmina (NASDAQ: SANM) fell 4.1%. Is now the time to buy Sanmina? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Keysight (KEYS)
Keysight’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock gained 11.7% on the news that the company reported strong third-quarter results, exceeding Wall Street's sales and earnings forecasts.
Orders were strong, up sequentially, and ahead of analysts' expectations, driven by robust AI-related demand and strong year-end bookings in U.S. Aerospace, Defense, and Government businesses. However, there was a slight shortfall in backlogs compared to expectations, though it did not offset the positive momentum. Management noted that the demand environment might remain mixed, at least in the short term. Encouragingly, the company was able to provide solid guidance for the next quarter, with sales and EPS forecasts ahead of consensus estimates. Zooming out, we think this was a very solid quarter, highlighting the company's strong execution and resilience.
Keysight is flat since the beginning of the year, and at $162.29 per share, it is trading 12.3% below its 52-week high of $185.11 from February 2025. Investors who bought $1,000 worth of Keysight’s shares 5 years ago would now be looking at an investment worth $1,535.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
