What Stocks Benefit From Supply Chain Problems?

While war rages on in the Ukraine, record high energy prices and a labor shortage affecting almost every industry makes it look like the global supply chain crisis that’s been afflicting us the past few years isn’t about to end anytime soon.

But that doesn’t mean you can’t still benefit from these volatile times. With that thought in mind, here are some of the best supply chain stocks that should do well when the rest of the world appears to be falling apart.
 

ZIM

While trucking companies have enjoyed relatively good performances during the global supply chain crisis, they’ve still faced difficulties due to a contracting labor market, as well as increased vehicle costs from the ongoing semiconductor shortage.
 
However, one section of the transportation industry that’s really seen its profits explode recently has been the ocean-liner shipping segment. Bottlenecks in the wider supply chain architecture have led to a shortage in available cargo containers, and companies are capitalizing on this spike in demand by upping their shipping rates accordingly.
 
For instance, the spot rate for a typical 40-foot shipping container going from Asia to the US grew 10-fold last year to reach a peak of $20,000 at one point.

This is all good news for companies involved in managing these cargo sea lanes, especially ZIM Integrated Shipping Services Ltd., a “global-niche operator” whose earnings and revenues have soared during the last few quarters.
 
In fact, the company is so flush with cash right now that the firm has announced its intention to initiate a capital allocation strategy that will distribute a quarterly dividend that pays out 30-50% of its annual net income. This means that ZIM will pay a special “catch-up” dividend at the close of every year, to take the total payout to the stated level.
 
Investors are eyeing this as a great opportunity to snatch a dividend that could yield as much as 20%, given that analysts are expecting earnings for the business to hit around $38 per share in 2021.
 

Etsy

Despite the fact that large enterprises handling much of their own logistics are still in a good place to weather the worst of the supply chain crisis, it’s also true that marketplaces where third-sellers handle their own shipping and packaging operations are pretty robust too.
 
Etsy, for instance, is one such case. The online platform is a well-known – and well-loved – e-commerce company that connects makers of handmade and craft products with a worldwide audience looking to buy their wares.
 
The business was seen as one of the winners during the coronavirus pandemic, in which it managed to grow its habitual buyers demographic by 224% during the period. The boost in popularity of the gig economy during the lock-downs also enabled Etsy to increase its revenues throughout the COVID-crisis too.

But the tailwinds that continue to drive Etsy’s success didn’t just arise during the pandemic, however. There have been secular trends towards the use of last mile delivery logistics for years now, and the online shopping habits that proliferated throughout 2020 and beyond are likely to remain.
 
New supply chain models are being developed to facilitate increased curbside deliveries, and Etsy is a part of that flourishing ecosystem.
 
As for the business itself, Etsy, like many other tech companies of late, has seen its share price decimated since the closing weeks of November 2021, losing nearly half its value when it dropped from highs of $296 to just $151 today.
 
That said, the firm is demonstrating good profitability metrics with a gross profit margin of 72%, and its year-on-year revenue growth is healthy at 35%. The company’s forward price-to-sales ratio of 7x is also relatively cheap, especially given its status as a fast growing tech platform too.
 
The firm is adding to its portfolio of acquisitions with Reverb and Depop Limited, and is well-positioned to expand its operations into the future.
 
Source: Unsplash
 

Palantir

The post-COVID global trade settlement seems increasingly to be one markedly different than that which existed before. Countries the world over have embarked on a new raft of protectionist foreign investment rules, with the outlook now more inclined to suspicion than co-operation.
 
The anti-China Foreign Investment Risk Review Modernization Act (FIRRMA) of the Trump-era presidency is in full-effect, while the EU’s own attempt at foreign direct investment oversight, Regulation (EU) 2019/452, is also now finally operational too.
 
Geopolitical tensions which had simmered away for years have come to the fore recently, with the most gruesome example being Russia’s ongoing invasion of its neighbor state, Ukraine. A flurry of interconnected sanctions and boycotts have emerged from this, and how it will all play out is anyone’s guess.

And it’s this fog of war that the software and analytics firm Palantir is perfectly poised to exploit. The company specializes in using big data to glean insights into various aspects of the industrial, military and financial sectors, and has a suite of high-profile clientele, including the United States Department of Defense , Airbus, and the International Atomic Energy Agency (IAEA), to name but a few.
 
Palantir’s military and conflict predictive analytics will become an essential tool for businesses and other organizations over the next few years, as the world becomes a more dangerous and uncertain place. The firm’s shares are trading at close to an all-time low right now, and should offer investor’s some serious upside for here on out.
 

GXO Logistics

When supply chains break down and become more complicated, there’s an opportunity in the space for companies to provide solutions in managing these emerging difficulties. This is where GXO Logistics steps in.
 
The firm is a pure-play contract logistics business that solves supply chain conundrums for some of the world’s biggest blue chip companies.

Indeed, GXO has a diverse set of customers, ranging from Kellogg’s and Carlsberg in the food and beverage industry, Intel and Apple in the technology sector, and Disney and Virgin in the entertainment world. The logistics firm offers a vital service to these companies through its track record of innovation in warehouse automation and robotics, delivering tailored and trusted solutions that they can’t get anywhere else.
 
The company beat revenue expectations by $210 million in the fourth quarter to bring in a top-line of $2.26 billion, up 28% year-on-year. The business continued to add new customers throughout 2021, helping take its full-year revenues to $7.9 billion, while delivering a record sales pipeline of $2.5 billion.
 
Management expects continued growth into 2022, with organic revenue increasing 8% to 12%, and free cash flow to come in at roughly 30% of its adjusted EBITDA. And GXO’s stock is exceedingly cheap at the moment, with the firm’s forward Enterprise Value-to-sales multiple at just 1.3x.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.