Supply-chain turmoil has disrupted economic activity during the pandemic, leading to talk of U.S. companies reshoring their production.
That means they would produce their goods domestically rather than overseas.
“The Russia-Ukraine conflict and risks of China-Taiwan conflict further corroborate the notion that peak globalization is behind us,” Bank of America strategists wrote in a commentary.
They looked at S&P 500 companies for potential beneficiaries of reshoring of manufacturing chains. “We screened for domestically-oriented companies (less than 15% foreign sales) with the highest sales growth sensitivity to U.S. private non-residential fixed investment (capital expenditures).”
These are the top 10 companies on the list:
1. Quanta Services (PWR) , which provides infrastructure services;
2. Ventas (VTR) , a healthcare real estate investment trust;
3. AvalonBay Communities (AVB) , an apartment REIT;
4. Equity Residential (EQR) , an apartment REIT;
5. Mid-America Apartment Communities (MAA) , an apartment REIT;
6. SVB Financial (SIVB) , a bank;
7. Regency Centers (REG) , a shopping center REIT;
8. AT&T (T) , the telecommunications giant;
9. Alexandria Real Estate Equities (ARE) , an office/laboratory REIT;
10. Regions Financial (RF) , a bank.
Morningstar’s Take on Quanta
Morningstar analyst Brett Castelli assigns Quanta no moat and puts fair value for the stock at $102. It recently traded at $119.
“We believe the company is a leader within specialty contractors for electric transmission and distribution services as well as its newly acquired renewable engineering, procurement, and construction business,” he wrote in a commentary.
“However, we have not seen its market share leadership translate to superior returns on invested capital relative to peers and see limited economic moats across our engineering and construction group coverage.”
Morningstar’s Take on Ventas
Morningstar analyst Kevin Brown gives the company no moat and puts fair value for the stock at $69. It recently traded at $51.
“Ventas will benefit from industry tailwinds due to its portfolio of high quality assets connected to top operators in the senior housing, medical office buildings, life science, and hospital segments,” he wrote in a commentary.
“Ventas has made a bet on the potential future of healthcare delivery by partnering with Ardent Health Services, an acute-care hospital owner and operator, and partnering with Wexford, a life science operator and developer.” That could work, Brown said.
Morningstar’s Take on AvalonBay
Brown assigns the company no moat and puts fair value for the stock at $234. It recently traded at $194.
“AvalonBay Communities owns and operates high-quality multifamily buildings in urban and suburban coastal markets with demographics that allow the company to maintain high occupancies and drive strong rent growth,” he wrote in a commentary.
But, “we are cautious about AvalonBay's growth prospects, given that new supply has been high in many of its markets.”
The author of this story owns shares of Ventas.