6 Stocks That Could Soar Due to the Supply Chain Crisis
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As you check yet again on the shipping status of a last-minute holiday gift, it might come as a surprise that not everyone is hurting from the supply chain crisis.
Yes, retailers are scrambling to nab space on shipping containers, and cargo ships are stuck in congested ports. There's a shortage of truck drivers, as well as retail workers. Businesses are struggling to keep up with customer demand and keep costs down.
But some companies that are helping other businesses deal with the supply chain crisis could actually come out benefiting, and experts say you may want to consider adding them to your stock portfolio.
While supply chain woes have grown acute in recent months, they didn't start with the pandemic, says Lisa Chai, partner at ROBO Global in New York, who focuses on robotics and artificial intelligence.
"The entire architecture is very primitive," Chai says. "We really need a modern supply chain network."
That means the companies that help develop that new network — and benefit from the great need for it — may outperform even after this current crisis passes. Meanwhile, others are getting a one-up on their competitors during this time of huge demand.
Here are six stocks that experts say may actually benefit from the supply chain crisis.
Thanks to the boom in e-commerce, parcel carriers are essential in getting items you order online to your home. Of the major players — United Parcel Service (UPS), FedEx and more recently, Amazon — UPS is the clear leader, says Patrick Donnelly, senior analyst at Third Bridge Group.
The company's change in leadership and focus has been a big part of that, he says. Carol Tomé took over as CEO in June of 2020, and since then the company has undergone strategic shifts, including selling its freight business to focus on small-package delivery.
"They've reiterated time and time again that bigger is not better," Donnelly says.
And working with a unionized labor force has helped the company pull ahead of its rivals amid a massive labor shortage. Often, working with a union workforce may be seen as a disadvantage, but UPS is better able to plan for labor costs and adjust costs accordingly due to union contracts, Donnelly adds. (Amazon and FedEx did not respond to Money's request for comment about UPS having a competitive advantage due to its unionized labor force.)
Union Pacific is a railroad company that offers intermodal freight transport, which means moving cargo via multiple modes of transportation, like a train and a ship.
"Trucking can't handle the volume of demand coming through the ports at this point," Donnelly says. So companies like Union Pacific that have a strong intermodal offering will likely benefit due to the increasing volume into the railroad networks versus trucking.
Plus, Union Pacific has locations near West Coast ports, and will benefit from the overflow seen there, he says.
Retailers are realizing that they can't stay on top of supply chain logistics on their own, Chai says.
"They don't have good real-time data, and supply chain executives are exhausted trying to figure out which company and innovative technology they should implement," she adds.
But GXO Logistics has the technology to assist retailers in logistics management. The company has a very robust technology team that is constantly testing new products for their customers, Chai says.
Retailers aren't experts in warehouse automation — but they do need it, and they'll continue to need it to be as up-to-date as possible even after the current supply chain crisis passes.
After you finish your online shopping, the company has to contact the warehouse to make sure it has what you bought in stock. The problem is that often the warehouse doesn't actually have the product — maybe it's in a different warehouse. But if you paid extra for expedited shipping, the retailer now has to scramble to get the product from a warehouse in Utah, for example, and all the way to you in, say, Pennsylvania.
Enter Manhattan Associates. The company has been around for about 20 years and is a leader in providing warehouse management software, Chai says. It allows retailers to see their products flow in and out of different warehouses, and it partners with companies that can analyze this data in real time.
“Retailers are realizing that they can’t do this on their own,” Chai says. So Manhattan Associates is going to benefit from the revamp of the supply chain, she adds.
Trimble started out as a GPS hardware company. But over time, it's become a software company as well, says David Kalis, a partner and portfolio manager at The Future Fund.
Here's just one example of how it's used: A trucking company can use the software to know where all its trucks are, what their load is, what their mileage is — all part of managing the supply chain for a trucking company.
Kalis is bullish on Trimble, which he expects to come out of the supply chain crisis as a winner as companies realize the need for this type of software.
For companies that have hundreds of stores, thousands of products and suppliers around multiple countries, collecting and analyzing data is a huge challenge. The software company Splunk takes its customers' raw data and puts it into a format that is actually readable, so that those retailers can see patterns related to pricing, and where products are, Kalis says.
"It's a way to take a very detailed, global look, but in a simple format on a real-time basis," he adds.
Analyzing data in this way has become especially important during the pandemic, when companies increased their digital footprints, and will continue to be important going forward now that the supply chain network will have to be completely reworked to keep up with the times, Kalis says. He also likes Splunk's emphasis on security, since the more software a company installs, the more susceptible it is to data breaches.
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