The outbreak of Covid-19 and its ripple effects across the global economy continue to cloud the outlook for long-term investors. It is especially important to assess the investment risks posed by the ongoing impact on various industries’ supply chains.
It is crucial to assess industry and company risk across the whole value chain and watch out for companies exposed to supply-chain risks. Then you will be ready and able to respond efficiently during times of market panic, turning fear into opportunity.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
These are companies better able to weather the short-term storm that the coronavirus has generated across both the supply and demand side of global economies and along whole supply chains.
Resilience in Italian luxury retail
We believe that companies with more wholesale exposure will be at higher risk. However, established brands with stronger balance sheets will be in a better position to withstand the inventory dislocation caused by the marked reduction in customers.
The Italian luxury fashion retailer Moncler (Milan: MONC) is a good example of this resilience. Thanks to its limited wholesale exposure and strong inventory control, it stands to benefit from strong pricing power over the long term.
We believe that the structural growth potential of the company and its ability to innovate remain strong despite the global economic damage done by the pandemic.
Medical monitoring devices
We also hold the global medical technology company Masimo (Nasdaq: MASI), which develops and manufactures innovative non-invasive patient-monitoring technologies. Products range from fingertip pulse-measuring devices to wearable thermometers that send data to smartphones.
We view Masimo as an extremely high-quality business stewarded by an experienced management team, and as such we are confident in its ability to navigate turbulent operating environments – witness the group’s recent relative performance this year.
Potential virus-induced supply chain problems for Masimo could come from consolidated manufacturing facilities or single-source component suppliers being temporarily disrupted. However, we continue to expect a very strong performance from the company.
Ferrari roars ahead
Inventories in this sector are generally low, and so there is a higher risk of disruption along the supply chain and onto the car manufacturers. In terms of our portfolio holdings, Ferrari (Milan: RACE) might look the most vulnerable, with its entire manufacturing base in Italy.
The company can shift some of its production base around the different models, notably its limited-edition cars, to ensure that capacity is managed efficiently. This is testimony to the company’s pricing power and unique product offering, which should help it get through the short-term volatility in better shape than the rest of the sector.
-
NS&I raises interest rates on British Savings Bonds – are they any good?Savers can access inflation-beating rates on NS&I's British Savings Bonds but there are better deals on offer in the wider market.
-
'I've used my annual ISA allowance. How can I shield my savings from tax?'As millions face paying tax on savings interest, we explore how to protect your money from the taxman. If you've used up your ISA allowance, we look at the other tax-efficient options.
-
'Why I launched MoneyWeek'Inspired by The Week and uninspired by the financial press, Jolyon Connell decided it was time for a new venture. That's where MoneyWeek came in
-
'My predictions for the next 25 years'Opinion What will the world look like when MoneyWeek celebrates its 50th birthday? Matthew Lynn shares his predictions
-
How have central banks evolved in the last century – and are they still fit for purpose?The rise to power and dominance of the central banks has been a key theme in MoneyWeek in its 25 years. Has their rule been benign?
-
What MoneyWeek has learnt in the last 25 yearsFinancial markets have suffered two huge bear markets and a pandemic since MoneyWeek launched. Alex Rankine reviews key trends and lessons from a turbulent time
-
The Stella Show is still on the road – can Stella Li keep it that way?Stella Li is the globe-trotting ambassador for Chinese electric-car company BYD, which has grown into a world leader. Can she keep the motor running?
-
Global investors have overlooked these solid stocks going for growthOpinion Nisha Thakrar, investment specialist at Nedgroup Investments, selects three undervalued stocks with long-term growth potential
-
LVMH is set to prosper as the wealthy start shopping againAfter two years of uncertainty, the outlook for LVMH is starting to improve. Is now a good time to add the luxury-goods purveyor to your portfolio?
-
Japan is still rising to new highs – here's how to investOpinion Political ructions in Japan are no obstacle to gains, and the return of inflation may even benefit stocks, says Max King. What is Japan doing right?
