Supply-chain disruption has pressured inventories of everything from semiconductors to bicycles.
That has hurt the fortunes of companies in the many industries affected by supply shortages. For example, auto companies have suffered from the lack of semiconductors, which are essential parts for their vehicles.
This doesn’t mean you have to steer clear of the stocks hurt by supply-chain issues. Those issues will eventually fade. But you might want to take them into account for the short term.
Bank of America assembled a list of the S&P 500 companies with the most mentions of “supply chain” in their first-quarter-earnings calls. B of A also screened for companies with more mentions in the first quarter versus the prior seven quarters.
Here are the top 10, with the number of first-quarter “supply chain” mentions for each:
1. Lam Research (LRCX), a semiconductor-equipment company. Number of mentions: 16.
2. Pentair (PNR), a water-treatment company. Number of mentions: 15.
3. F5 (FFIV), a cybersecurity company. Number of mentions: 12.
4. Roper Technologies (ROP), a software-systems company. Number of mentions: 10
5. Fastenal (FAST), an industrial-products distributor. Number of mentions: 9.
6. Newmont (NEM), a gold miner. Number of mentions: 8.
7. Prologis (PLD), an industrial real estate investment trust. Number of mentions: 7.
8. Genuine Parts (GPC), an auto/industrial-parts company. Number of mentions: 7.
9. General Motors (GM), the giant automaker. Number of mentions: 7.
10. Enphase Energy (ENPH), a solar-energy-product maker. Number of mentions: 7
Morningstar’s Take on Lam Research
Morningstar analyst Abhinav Davuluri assigns the company a wide moat and puts fair value for the stock at $720. That's nearly twice the recent price of $379.
“Lam Research is a major vendor of semiconductor fabrication tools,” he wrote in a commentary. “The firm is the leader in dry etch, a critical step in the chipmaking process where material is selectively removed.”
Further, “Lam has … cost advantages and intangible assets related to equipment design,” Davuluri said.
“Lam's leadership position creates scale advantages that fuel research and development spending at levels only Applied Materials (AMAT) and Tokyo Electron (TOELY) can match.”
Morningstar’s Take on F5
Morningstar analyst Mark Cash gives the company a narrow moat and puts fair value for the stock at $210, or 40% above the recent trade at $150.
F5 is a leader in application delivery controllers, he wrote in a commentary. “F5 was slow to embrace cloud-based workloads as it perilously defended its incumbent offerings,” Cash said.
“But a revamped management team properly pivoted F5's focus toward software and cloud-based products as growth catalysts to supplement its legacy hardware dominance. And we think the firm is set to thrive.”
