A budding megatrend in the U.S. heartland … how Covid changed global supply chains forever … the data behind U.S. companies bringing manufacturing back home … how to invest
The wait is over for a new era of American wealth-building.Deep in our country’s Heartland – a far cry away from the traditional moneymaking cities of Silicon Valley, Houston, or Manhattan – a massive new megatrend is unfolding.As multiple forces behind this megatrend begin to converge in our backyard, stocks from every sort of background stand to stake a significant claim…And reward their investors in the process.
That rather-bold quote comes from macro expert Eric Fry.What exactly is he talking about?In short, we’re on the verge of seeing an explosion of “Made in America 2.0.”To be clear, this isn’t the reshoring of cheap consumer goods that went to China decades ago. This new U.S.-based manufacturing megatrend centers on cutting-edge technologies that will power the global economy for decades.
To understand this investment opportunity, it starts with Covid
Before we jump in, for newer Digest readers, Eric is our global macro specialist and the editor behind Fry’s Investment Report.As a macro investor, he evaluates markets and asset classes from a big-picture perspective to identify attractive opportunities. Once something is in his crosshairs, he digs down to find the best, specific investment to play the opportunity.It’s been a powerful strategy. In his decades in the business, Eric has dug up more 1,000%+ gaining investments than anyone we know of in the newsletter industry.Eric believes we’re standing at the cusp of another such 1,000%+ opportunity today.To understand why, let’s rewind to early 2020, and the initial spread of Covid.A recent research report published by The National Library of Medicine calls Covid “the highest disruptive event in the world’s recent history.” But Covid wasn’t just a humanitarian disruption. It also changed global business patterns forever, specifically supply chains.As you’re aware, supply chain disruptions were a major contributor to the inflationary challenge we’ve faced for more than one year now.With this context, let’s pick up with Eric explaining why supply chains will never return to their prior shape:
In general, global supply lines are functioning normally once again. But they will never be the same… or at least we will never trust them like we used to.The entire world has learned, or should have learned, that far-flung supply chains are risky supply chains.They continuously face three key threats…1. Geopolitical stresses or crises, like when countries impose punitive tariffs during trade wars or implement crippling sanctions during actual wars…2. Rising transportation costs, like when fuel prices or shipping container prices soar…3. And sclerotic transportation supply lines, like when the average time a cargo ship sits at anchor waiting to unload at L.A.’s Port of Long Beach triples from seven days to 21. No U.S. company can afford to ignore these risks any longer. The era of unfettered globalization is over, and it’s now reversing course towards something less global.This reversal is called deglobalization… and it is one of the world’s newest megatrends.
The increasingly dangerous bedfellow of China
Covid was an eye-opener in many ways.From a business perspective, many U.S.-based companies realized how reliant they were on China.From CNN back in June of 2020:
The Covid-19 pandemic has revealed a terrible truth: Our mindless over-reliance on China has led us to no longer have the capacity, the expertise or the manufacturing infrastructure to meet our own nation’s needs…Take, for example, that 90% of antibiotics and 80% of active ingredients for other medicines come from India and China. That means we no longer have the ability to easily ramp up production of such items here.
The overreliance isn’t just on healthcare.Perhaps more terrifying was the risk of China becoming the world’s cutting-edge technology leader, able to set the standards for tomorrow’s innovations. The spoils of winning that race would eventually register in the trillions of dollars.Fear of Chinese technologic supremacy is what prompted the blackballing of Chinese telecom giant Huawei that we covered here in the Digest.Back to Eric:
The pandemic laid bare the dangers of being overly dependent on China and other foreign supply chains.Everything from a war to a global health crisis to the changing whims of a nation’s leaders could choke off sources of critical goods and ingredients…Because of this realization, ramping up U.S. production of key raw materials and products became ‘priority #1’ in boardrooms across America.
The push to bring manufacturing back home
Eric writes that last year, a UBS survey questioned U.S. manufacturing executives about their future production plans.More than 90% of the respondents said they either were in the process of moving production out of China or had plans to do so. And about 80% said they were considering bringing some portion of it back to the U.S.As a few examples, there’s General Motors announcing it will spend $7 billion on four plants in Michigan… GE Appliances has invested more than $2 billion in its US plants and distribution centers since 2016… Intel is investing $12 billion on two U.S.-based chip factories.We’re seeing similar reshoring from Nucor, Generac Power Systems, and Lockheed Martin to name a few.In Eric’s recent Investment Report issue, he profiled this opportunity and highlighted Ford, which has broken ground on the largest, most advanced production complex in its 120-year history. From Eric:
For both Ford and Intel, the future they imagine is one where U.S. technological and industrial prowess leads the way, and where refortified U.S. supply chains replace foreign ones…If we pull back from these individual examples to a 30,000-foot perspective, the picture that comes into view is unmistakable; the Made-in-America trend is catching fire.According to Dodge Construction Network, construction of new manufacturing facilities in the US has soared 116% over the past year – far outpacing the 10% increase on all building projects combined.
How do you invest?
This is a massive trend with many different ways to invest.Though we’re not officially recommending it, there’s a “Made in America” ETF with the ticker “AMER.” Its top holdings include Hormel Foods, Northrop Grumman, Tyson Foods, Altria, and Nucor.Plenty of great businesses there, but not exactly the concentration in technology that we alluded to earlier.For that, you could research which U.S.-based tech companies are doing the most onshoring and cross-reference them for their exposure to tech. As a starting point. the website Reshorenow.org is an invaluable resource for more information, even providing a master list of companies that are bringing jobs and manufacturing back to the U.S.I’m scrolling the list seeing household names including 3M, Abbot, Advanced Micro Devices, Alcoa, GlaxoSmithKline, Michelin, SunPower, and Tesla, among literally thousands of others.If you’d prefer to outsource the research process to Eric, click here to join him in Investment Report to access all the research he’s already compiled as well as his related investment recommendations.He recently added five new investments to the Investment Report portfolio that are poised to benefit from this budding trend.In any case, this needs to be in your crosshairs. Billions of dollars’ worth of manufacturing are returning home in the coming years.I’ll give Eric the final word:
Clearly, the Made-in-America, 2.0 megatrend is well underway. As it gains momentum, it will produce a massive new wave of technological innovation… and provide a new generation of Made-in-America investment opportunities.
Have a good evening,Jeff Remsburg
