Supply crisis: Five stocks that can weather the storm
09:47, 22 April 2022
The Covid-19 pandemic, trade disputes with China and more recently the conflict in Ukraine have caused huge supply issues – but some companies, including UK online estate agent Rightmove (RMV) and US social media giant Meta Platforms (FB), have managed to weather the storms better than others.
There is a saying “It’s an ill wind that blows nobody any good”, which essentially means that every bad situation must have some good results. So, where are these ‘good results’ in the stock market? What companies might benefit from or at least be sheltered from the impact of global supply pressures?
Laith Khalaf, head of investment analysis at AJ Bell, suggests you can probably avoid the worst of any supply chain issues by focusing on companies that offer services rather than goods and are therefore less affected by logistical problems. On the UK stock market, he picks out Rightmove (RMV) and Legal and General (LGEN), and in the US, Meta (FB) – formerly Facebook.
Christopher Rossbach, chief investment officer at investment manager J Stern & Co, says his technology exposure has a strong focus on software and internet companies. Like Khalaf, he picks out Meta, on the grounds that it does not have the same semiconductor supply issues associated with hardware companies.
He also namechecks Eaton (ETN), a global technology leader in electrical systems, which, he says, has modified its supply chains by multi-sourcing, embracing digital logistics planning solutions and redesigning products.
Jamal Abida Norling, CEO and chief investment officer at investment manager Ohman, says his stock selection during the period has focused on quality companies showing good growth characteristics. As an example of this he picks out Veeoner, what he calls a “quality-style company with solid track record of acquisitions”.
Let’s look a bit closer at these five favoured stocks.
Founded in the US but now a global business with its headquarters in Dublin, Ireland, Eaton (ETN) is a power management specialist.
In late March 2020, when the impact of Covid-19 was beginning to be felt across the world, the stock price stood at $74.42 – now it is $149.95.
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Eaton (ETN) price chart
The online property portal Rightmove (RMV) has been well-placed to benefit from what has been a buoyant property market post lockdowns.
The start of 2022 painted a positive picture for investors, with average UK property values up by 11.2% in the year to January, marking the strongest start to the year for 17 years, according to lender Nationwide.
Recent figures from rival portal On The Market show that 48% of residential property was sold subject to contract within 30 days of being advertised in January, compared with 36% in January 2021, indicating strong buyer demand. Whether that continues as inflation bites and the cost of living rises, is open to debate.
Rightmove has also come under fire for the high listing fees it charges estate agents, but several new challengers have so far failed to dislodge the market leader from its dominant position.
London-listed Rightmove’s stock price stood at around the 487p, after hitting a high of 795p in early December 202. The stock has since dropped back to around the 620p mark.
Rightmove (RMV) price chart
Legal & General
It has been a steady year for the London-listed financial services provider and asset manager Legal & General (LGEN).
This time last year the stock price stood around 272p, and it dropped to 243p in late February before recovering to today’s 262.80p level.
Legal & General (LGEN) price chart
The US-based giant (FB) is the parent company of Facebook, Instagram, WhatsApp, Workplace and Messenger (among others).
Meta Platforms’ shares have fallen back some way in 2022 and it could be argued this has created a buying opportunity.
MarketBeat currently says Meta Platforms has a consensus rating of ‘buy’. The average rating score is based on 32 buy ratings, 11 hold ratings, and 1 sell rating.
The company’s digital advertising strength is well documented – Facebook currently has more than 10 million advertisers on its platform. And it continues to spend heavily on developing its offering.
However, in the fourth quarter of 2021, Facebook saw its user numbers fall. There are also ongoing concerns over whether the negative media attention late last year, when a senior former employee accused the company of putting profit over the public good, will resurface. There is the possibility of tighter regulation on social media platforms.
Meta Platforms (FB) price chart
In June 2018, Swedish-based Autoliv (ALV) spun off its autotech business into a separate company, Veoneer (VNR).
Veoneer, produces sensors, control units, software and systems for advanced driver-assistance systems (ADAS), and automated driving (AD).
Nasdaq-listed Veoneer’s stock price has risen steadily over the year – from just over $24 last year to around the $37 mark today.
Markets in this article
Autoliv - SEK
Meta Platforms Inc.
Legal & General