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With COVID-19 still affecting life and livelihoods in the United States, and unemployment rates still at record levels for several decades, forecasts or promises of many new jobs in the United States United can seem fantastic or pious. However, some observers believe manufacturing jobs may actually come back to the United States, and some say the trend has already started.
One important factor is the current upward trend in wages in China, where there are many manufacturing plants. Coupled with the transportation costs and tariffs of moving goods and components across the world, the United States is starting to emerge as a competitive option.
Many companies would benefit from a large-scale outsourcing of manufacturing operations, so it’s hard to pick just four possible winners. But these big companies would all be ready to benefit for different reasons.
Image source: Getty Images.
1. Nucor
Manufacturing often means steel, and in the United States, steel means Nucor (NYSE: NUE), the largest steelmaker in the country.
Not only is steel used in obvious manufacturing sectors like the automotive industry or household appliances, but many plastic or wood products like toys and furniture rely on steel components like bolts, screws and executives. Nucor mainly manufactures rolled steel sheet, but also supplies steel bar, wire and tubing. Almost all of its operations are in the United States, so increased manufacturing activity nationwide would give Nucor a big boost.
Nucor’s dividend is currently earning around 3.5%, and while the US steel market is showing surprisingly resilient in the second quarter of 2020, stocks are still down for the year. This would be a great time to buy if you think American manufacturing is about to take off.
2. Rockwell Automation
Wages may be increasing in China, but they are generally higher in the United States, and the benefits and protections required for workers are also stronger here at home. Businesses can, however, reduce costs by investing in automated systems for their factories and robotics to supplement their workforce. In the era of COVID-19, robots can also help maintain the required distance while keeping things running in a factory.
Robotics and automation specialist Rockwell Automation (NYSE: ROK) agrees. In his recent Q3 2020 earnings call – for the period ended June 30 – CEO Blake Moret said he believed the pandemic “is accelerating the need for industrial automation and digital transformation solutions that address manufacturing security as well as operational flexibility and resilience. ” . “
As the largest US supplier of factory automation systems, Rockwell would certainly benefit from greater home manufacturing.
3. STAG Industrial
You can’t craft something if you don’t have a place to do it. Industrial STAG (NYSE: STAG) is a real estate investment trust (REIT) that owns factories, manufacturing plants and other industrial sites, which it leases to clients large and small.
STAG deliberately avoids buying real estate in large, expensive markets, instead focusing on cheaper markets in smaller towns and suburbs or on the outskirts of larger ones. For manufacturers looking to save money, leasing space – rather than owning it – in a cheaper market is an attractive prospect.
Of course, STAG has a limited supply of real estate, so it’s not as if it will necessarily capture a large part of the repatriated factories. But a greater number of potential customers in the manufacturing sector would increase the already booming business of STAG’s e-commerce distribution center. As a REIT, it also pays a generous dividend, which is currently earning 4.4%.
4. Berkshire Hathaway
Warren Buffett’s iconic company Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is known for its insurance business and for having a large portfolio of investments in other businesses. While the manufacturing jobs returning to the United States will certainly require insurance policies, Berkshire is more likely to see a boost for some of its wholly owned subsidiaries, including:
- BNSF: More domestic manufacturing would mean more demand for shipping parts and finished goods. This railway is just a shipping company that would benefit from it.
- IMC International Metalworking Companies: Owns US (and international) manufacturers of cutting and grooving tools for industrial applications, including manufacturing.
- Precision Castparts: Manufactures complex components used in the manufacture of everything from aircraft engines and turbines, to cars and medical equipment.
- Precision steel warehouse: Based in Illinois, it doesn’t fabricate steel (that’s Nucor’s job), but prepares raw steel for use in manufacturing by cutting sheets and coils to precise lengths and widths, by finishing edges and doing other work that saves manufacturers time and floor space.
Lots of unknowns
Even if some of the manufacturing is already repatriated to the United States, there is no guarantee that a mass movement to bring manufacturing back to the United States will be fast, smooth, or even happen at all. There are other countries with cheap labor besides China, and the pandemic, trade issues or any number of other variables could speed up the process … or postpone it indefinitely.
But if it does – and I think there’s a good chance it will – Nucor, Rockwell Automation, STAG Industrial and Berkshire Hathaway should benefit.
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