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“ ‘China accounts for about 20% of revenues for both companies, and I think what people need to be thinking about right now is potentially managing risk on these positions by potentially trimming.’ ”
That’s Mark Tepper, president of Strategic Wealth Partners, explaining in an interview with CNBC on Wednesday why he believes Apple AAPL, -1.58% and Nike NKE, +0.60% could both be at risk of a downturn amid heightening tensions between the U.S. and China.
The already fractious relations between the two world powers were dealt another blow this week when the U.S. ordered China to close its consulate in Houston to protect American intellectual property. China, for its part, said it would retaliate.
“The escalation in U.S.-China tensions is a reminder of the headline risk faced by investors during the upcoming U.S. election campaign,” AxiCorp’s Stephen Innes said.
Tepper said that “headline risk” could fall squarely on Apple and Nike.
Apple, which has been on a tear this year, looks to be “priced for perfection,” Tepper said, pointing out that the stock’s forward price-to-earnings ratio is double its five-year average.
“As much as Apple wants to shift the focus towards services, they do need to get their phones in the hands of the consumer in China first,” he added.
Nike’s issues, on the other hand, is about more than just demand.
“In addition to getting a huge portion of their revenues from China,” Tepper said, “China also makes 23% of their shoes so that’s a problem as it relates to tariffs.”
Read:Nike reorganization will lead to job losses, one-time $200 million cost
With both of these companies, they’re good companies, a lot of people own them, but I think we have to be smart, we have to manage risk and it might make sense to trim.”
In Thursday’s mixed-up session, Nike managed to break into positive territory while Apple lagged behind. The Dow Jones Industrial Average DJIA, -0.49% was trading lower as both the S&P 500 SPX, -0.18% and Nasdaq Composite COMP, -0.28% were in the green.
Watch the interview:
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