Supply Chain Stocks to Buy as the Economy Recovers
Supply chains were a hot-button issue during the COVID-19 pandemic. Many of us never think about them, and yet, nearly everything we buy depends on functioning supply chains. It’s no surprise, then, that COVID-19 has had many of us thinking much more about supply chains and supply chain stocks than we had in the past. It also means we won’t soon forget about their critical importance.
The situation with some supply chains started to improve in 2021, and that continues into 2022. That inevitably means more investors will be drawn to these stocks in 2022 and beyond.
Look for these companies to power the economy going forward, and their stocks to make for strong investments as economic activity picks up.
- XPO Logistics (NYSE: XPO)
- CSX Corporation (Nasdaq: CSX)
- Manhattan Associates (Nasdaq: MANH)
- Splunk (Nasdaq: SPLK)
- Union Pacific Corporation (NYSE: UNP)
Supply Chain Stocks to Buy
Let’s take a closer look at each of these logistics and supply chain stocks and what they bring to the table.
No. 5 XPO Logistics
XPO Logistics is a freight transportation company providing less-than-truckload (LTL) and truck brokerage services. In February 2022, XPO announced that it was named Carrier Partner of the Year by GlobalTranz Enterprises for its LTL performance. XPO is one of the largest providers of LTL freight capacity in North America with over 12,000 drivers.
XPO shares have benefited greatly from the uptick in economic activity. Its share price increased sharply from March 2020 until May of the same year. Since then, its stock has more than doubled in price. It earns nearly $3 per share and is undervalued according to some analyses. Although its profit margin was negative in Q3 2021, it crossed back into profitability for Q4, with a net margin of 3.63%. XPO shares should continue to rise in the year ahead.
No. 4 CSX Corporation
CSX is a freight transportation company that focuses on rail transportation as well as real estate in North America. As one of the largest transportation suppliers in the country, its network covers 20,000 miles of track in 23 states, plus D.C. It also operates in Quebec and Ontario, Canada. The company is also working hard to address sustainability by increasing its fuel efficiency and lowering its overall carbon footprint.
Shares of CSX have also done well as of late, increasing steadily since mid-to-late March 2020. Since then, its shares have approximately doubled and show no signs of slowing down. It earns a healthy profit which was nearly 30% in each of the past two quarters. It also issues a quarterly dividend of about 1%, paid out quarterly. Nearly all of its fundamentals are trending in the right direction; look for shares of CSX to keep moving upward over the next year.
No. 3 Manhattan Associates
Manhattan Associates is a company that provides services that help businesses manage their supply chains. That includes warehouse and transportation management, enterprise point of sale systems and order management. In other words, it doesn’t move physical goods but enables the systems that do.
MANH has a market cap of over $8 billion and its shares have more than doubled since their low point in March 2020. For Q4 2021, its net profit margin was 12%, and that was its smallest profit of the past four quarters. Almost all of its fundamentals had been moving in the right direction, at least until Q4. However, it also brought in $171 million in revenue in Q4, which was the highest of the past four quarters. Look for this stock to continue its forward momentum in the next year.
No. 2 Splunk
As a big data company, Splunk may not be one of the first names that comes to mind when thinking about supply chain stocks. However, data can be used in almost any way, from making supply chains more efficient to better understanding customers’ preferences. And Splunk’s products, such as its cloud platform and enterprise tools, can help businesses do that and more.
Since Splunk is not strictly speaking a supply chain logistics company, shares of SPLNK have taken a bit of a different path. They did see a low point in early April 2020 and then increased in price, but then the stock began another downward trend in November 2020. As a result, SPLNK is trading just slightly higher than its April 2020 price right now.
Investors should also be aware that Splunk is not profitable at the moment, with a negative net margin and net income. Nevertheless, analysts consider it a moderate buy with a median price target that would likely outpace the market in the next year.
Supply Chain Stocks No. 1 Union Pacific Corporation
Union Pacific is a freight-hauling railroad and is the second-largest railroad in the U.S. Its operations 32,200 miles of routes and include 8,300 locomotives. Its routes link 23 states in the western two-thirds of the country. In addition, it serves approximately 10,000 businesses with its freight lines.
Union Pacific is a large company with a market cap of over $250 billion. Shares of UNP have fared well since the drop in 2020. They bottomed out around $117 and are now trading at nearly $245. Its fundamentals look quite strong as well; it is earning a consistent profit of around 30% each quarter. Its revenue in Q4 was $5.73 billion, and all of its earnings numbers are trending upward. Some analysts call it a strong buy due to the recovering economy, and its price should continue to move upward.