With COVID-19 still alive and well in the U.S. and the unemployment rate still at highs at multidecade, predictions or promises of a large number of new jobs in the U.S. may seem like fantasy to be desirable. However, some observers believe that employment tasks may in fact return to the US, and some say the trend has already begun.
One major factor is the continuing trend of rising wages in China, where many production plants are located. Coupled with transportation and fare costs to move goods and parts halfway around the world, the US is starting to become a competitive option.
Many companies would benefit from large-scale onshoring of production companies, so it is difficult to select exactly four possible winners. But these top companies would each be for different reasons to profit.
Image Source: Getty Images.
1. Nucor
Manufacturing often means steel, and in the US it means steel Nucor (NYSE: NUE), the largest steelmaker in the country.
Not only is steel used in obvious manufacturing sectors such as the automotive industry or appliances, but many plastic and wood products such as toys and furniture rely on steel components such as bolts, screws and frames. Nucor mainly makes rolling steel plates, but also supplies steel beams, wire and tubes. Almost all of its operations are in the US, so more domestic production activity would give Nucor a big boost.
Nucor’s dividend is currently delivering around 3.5%, and despite the US steel market surprisingly strong in the second quarter of 2020, shares are still down for the year. Now would be a great time to shop if you think American manufacturing is set to start up.
2. Rockwell Automation
Wages may increase in China, but they are generally higher in the US, and required benefits and protections for workers are more robust here as well. However, companies can sustain the cost by investing in automated systems for their factories and robotics to supplement their staff. At the age of COVID-19, robots can also help maintain required distance while things are still running on a factory floor.
Robotics and automation specialist Rockwell Automation (NYSE: ROK) once. In her recent Q3 2020 call – for the period ending June 30 – CEO Blake Moret said he believes the pandemic “accelerates the need for industrial automation and digital transformation solutions that address manufacturing security as operational flexibility and resiliency … “
As the largest U.S.-based supplier of factory automation systems, Rockwell would certainly benefit from more manufacturing at home.
3. STAG INDUSTRIAL
You cannot produce something if you do not have the space to do it. STAG INDUSTRIAL (NYSE: STAG) is a real estate investment property (REIT) that owns factories, factory plants, and other industrial locations, which it leases to clients large and small.
STAG deliberately avoids buying real estate in expensive large markets, instead concentrating on cheaper markets in smaller cities and suburbs rather than suburbs of larger ones. For manufacturers looking to save money, borrowing space – instead of owning it – in a less expensive market is an appealing prospect.
Of course, STAG has a limited supply of real estate, so it is not as if it would necessarily capture a large portion of repatriated factories. But a larger pool of potential production customers would increase STAGs already emerging e-commerce tracking center business. As a REIT, it also pays a generous dividend, which currently yields 4.4%.
4. Berkshire Hathaway
Icon by Warren Buffett Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is known for its insurance operations and for owning a large portfolio of investments in other companies. While employment tasks returning to the U.S. will certainly require insurance policies, Berkshire is more likely to see an impetus for some of its subsidiaries, including:
- BNSF: More domestic production would mean more demand for shipping parts and vertical goods. This railway line is only one shipping company that would benefit.
- IMC International Metalworking Companies: Owns US (and international) manufacturers of cutting and digging tools for industrial applications, including manufacturing.
- Precision Castparts: Makes complex parts that are used in making everything, from aircraft engines to power turbines, cars to medical equipment.
- Precision Steel Warehouse: Based in Illinois, it does not produce steel (which is Nucor’s job), but prepares raw steel for use in manufacturing by cutting sheets and coils to exact lengths and widths, processing edges, and performing other work that saves time and floor space.
Many strangers
Even if some manufacturing is already being repatriated to the US, there is no guarantee that a mass movement to bring American manufacturing back is fast, smooth, or even happening. There are other countries with cheap labor besides China, and the pandemic, worries about trade, as a number of other variables could speed up the process … or push it back indefinitely.
But if it does – and I think there’s a decent chance it could – Nucor, Rockwell Automation, STAG Industrial, and Berkshire Hathaway look forward to profiting.
