March 16, 2025

Ron Finklestien

Three Stocks to Consider Divesting Amid Rising Trade Tensions

Major Changes for GigaCloud and Other Companies Amid Tariffs

Last week, InvestorPlace Senior Analyst Louis Navellier made a notable decision to sell GigaCloud Technology Inc. (GCT) from his Accelerated Profits portfolio. This move may seem unexpected, akin to a chef discarding a perfectly cooked steak.

GigaCloud has displayed impressive growth, with a return rate exceeding 30%. Its revenue surged by 65% last year, resulting in net profits soaring to $125 million—a sixfold increase from just two years ago.

The company, which specializes in large parcel shipping, utilizes software to consolidate small shipments into larger loads, thus reducing transportation costs. Its primary business model connects Asian manufacturers with U.S. resellers. However, challenges now loom over this core business.

On February 4, President Donald Trump instituted a 10% tariff on all goods imported from China, leading to a temporary halt of postal service shipments as the details were ironed out. This tariff was later increased to 20%.

This escalation will likely devastate GigaCloud’s sector. Many Chinese exporters already operate on very thin profit margins, making a 20% surcharge detrimental to their viability and likely to drastically cut demand for GigaCloud’s logistics services. Consequently, analysts have reduced GCT’s 2025 earnings estimates by 20% since January, with further challenges anticipated.

Currently, GigaCloud holds a “D” rating in Louis’s Stock Grader (Navellier subscription required), which is not an enticing position at all.

The Los Angeles-based logistics firm is not alone; rising U.S. tariffs will impact several companies. As Trump mentioned in a recent interview with Fox News host Maria Bartiromo, the country is experiencing a “period of transition” that may involve “a little disruption.”

This article will explore three other companies Louis has opted to sell to mitigate potential impacts on his portfolio. If these stocks are part of your investment strategy, consider whether to reduce your exposure to these less favorable options.

Waiting for the Shoe to Drop

When people think of UGG shoes, they often envision the comfortable sheepskin footwear popular among surfers and college students, especially among TikTok users. The brand has accumulated a devoted following.

The modern college campus uniform

Investors, however, recognize that UGG is a brand under Deckers Outdoor Corp. (DECK), a footwear conglomerate that manages several well-known brands, including Hoka and Teva. Deckers actively acquires and sells brands to enhance efficiencies and profits. For instance, in 2013, Deckers acquired Hoka to develop a comfort running shoe line, complementing its UGG range. A couple of years later, it added Koolaburra to its UGG brand.

These strategies paid off significantly during prosperous years. Louis added shares of this rapidly growing firm in Growth Investor last year as margins expanded and profits increased at double-digit rates.

Your investment strategy may face challenges, as the “eggs in the same basket” approach is currently backfiring. Increased Chinese tariffs pose risks to Deckers’ profitability, prompting Louis to divest from the Stock last month.

Take the sheepskin used in UGG and Koolaburra shoes, for example. Deckers has kept costs low by sourcing this expensive material from just two Chinese tanneries and focusing manufacturing efforts in China and Vietnam. This reliance on a limited supply chain puts Deckers at a disadvantage compared to brands, like New Balance, with American-based manufacturing.

Recent analysis shows that first-quarter earnings estimates have been cut by 20%, while profits are expected to decline 29% year-over-year to $0.58 per share. Given the high valuation of DECK shares from previous growth, there is a considerable risk for further decline.

Derailing a Turnaround Story

Our next company to sell, Abercrombie & Fitch Co. (ANF) , is known equally for its controversies as its fashion lines. The mall retailer had been infamous for its provocative advertising aimed at teenagers, with a former CEO once claiming the brand was “only for cool people.” His resignation in 2017 marked a pivotal moment for the company.

Under new CEO Fran Horowitz, Abercrombie transformed significantly. She eliminated the company’s hypersexualized marketing and shifted focus to a more straightforward lineup aimed at young adults. Shares have skyrocketed 520% since her tenure began, leading Vox to commendably address Abercrombie’s resurgence as a closet essential.

Unfortunately, rising tariff threats may undermine Abercrombie’s recovery. The firm sources nearly half of its products from Vietnam and China, both of which face escalating U.S. tariffs. Vietnamese officials are particularly concerned, given that their country maintains one of the largest trade surpluses with the United States—something criticized by Trump.

This situation poses difficulties for Abercrombie, which has relied on significant gross margins to balance its elevated overhead costs. An increase of 5% in its cost of goods could trigger a 30% drop in net profits, and attempts to raise prices may not be well received by consumers.

Market Struggles: Homebuilders and Apparel Brands Face Nerve-Wracking Times

Apparel brands like Abercrombie & Fitch (ANF) are feeling pressure as cheaper options from competitors such as Target Corp. (TGT) capture consumer interest.

According to Louis, a market analyst, ANF lacks buying momentum, which serves as a warning sign despite some increases in profits and sales. He sold his shares of ANF from Growth Investor last month, suggesting others consider similar actions if they hold the stock in their portfolios.

Homebuilders Confront U.S. Tariff Threats

Homebuilders are starting to feel economic pressure from tariff threats in the U.S. market.

The Fannie Mae Home Purchase Sentiment Index revealed a decline of 1.8 points to 71.6 on March 7—marking the first year-over-year drop in two years. As of now, 62% of Americans believe it is a good time to sell a house, while only 24% feel it’s ideal for buying, largely due to rising mortgage rates and concerns about personal finances.

This sentiment impacts homebuilders, especially those focused on single-family homes like Toll Brothers Inc. (TOL). On February 19, the luxury homebuilder reported a slowdown in demand from the lower end of the market, noting that the overall spring selling season shifted from “solid” to “mixed.” Consequently, management plans to reduce construction of speculative homes—properties built without specific buyers and sold by market speculation.

Furthermore, rising input costs pose additional challenges. Homebuilders import 70% of softwood lumber from Canada, as domestic timber production fails to meet demand. In addition, they rely on imports for:

  • 45% of copper, essential for household wiring
  • 62% of household appliances
  • 71% of gypsum, which is used in drywall

The impact of tariffs on these imports will likely increase home prices. CoreLogic estimates that current tariff rates will raise the average new home price by 5% to $422,000 this year, with potential for further increases as additional tariffs are introduced.

Toll Brothers recently missed earnings expectations, leading to a downgrade of the stock to a “D” rating in Louis’ Stock Grader system. He sold his shares from Growth Investor last month as a result.

Seizing Opportunities Amidst Market Panic

In 2018, tariffs imposed by Trump disrupted many importers. Notably, Toll Brothers lost 10% of its market value by late 2019, while Abercrombie fell 15%. Some clothing brands, like Forever 21 and parent company L Brands for Victoria’s Secret, faced declines severe enough to prompt restructuring.

Conversely, several prominent tech firms thrived during that same period. Companies such as:

  • Advanced Micro Devices Inc. (AMD) surged by 285%.
  • Krystal Biotech Inc. (KRYS) increased by 459%.
  • Enphase Energy Inc. (ENPH) soared by 689%.

This demonstrates that high-growth innovators can often elevate performance despite broader economic challenges. Such companies focus on groundbreaking ideas that shape future technology, including artificial intelligence, biotech, and renewable energy.

This week’s market downturn may appear severe, and we could be at the beginning of a larger decline. Only President Trump can determine the escalation of the trade conflict.

Investors looking for avenues away from panic should consider Louis’ latest presentation discussing a technology that could offer substantial gains reminiscent of those seen with Nvidia Corp. (NVDA).

Quantum computing is poised for transformative advancements, potentially occurring at Nvidia’s Q-Day on March 20. If you want to get ahead before major investments pour in, it is essential to pay attention now.

Positioning early allows investors to benefit as mainstream awareness of quantum computing grows. Louis recommends investment in a small-cap quantum computing company strategically aligned to profit from Nvidia’s quantum initiatives. This company holds 102 patents and collaborates with renowned firms like Nvidia, Microsoft, Amazon, and NASA.

Don’t wait for the market to catch up. Click here to watch the free replay of Louis’ Next 50X NVIDIA Call before it’s taken down.

Until next week,

Thomas Yeung

Markets Analyst, InvestorPlace

Thomas Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during challenging periods.


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