Pro Perspectives 7/28/20

July 28, 2020

Back in early March, before the shutdown, the government was beginning to scramble to get funding packages moving to respond to the virus. 

They started with $8 billion, which is now a rounding error in the overall response. 

Back then, we talked about the winners that could come from government spending packages.  Here's an excerpt from my March 4th note: 

"Likely winners in the U.S. will be healthcare (related to the healthcare crisis — hospitals, pharmaceuticals)…  perhaps manufacturing, as an effort to bring the supply chain back home … that would [also] bode well for engineering companies, heavy equipment/ machinery makers, metals producers, natural resource stocks and maybe some left for dead industrial conglomerates (GE?)."  

Let's focus on the latter part:  bringing the supply chain home

We're seeing it, and its the very early stages. 

Through the Defense Production Act, we've already seen U.S. companies turned into medical supply manufacturers.  And today, Navarro announced the first major step toward moving the manufacturing of medicines back to the United States.  Indeed, he's doing it with a "left for dead" iconic American company, Kodak. 

Kodak was a $114 million company yesterday.  Today, it's worth three times as much.  In five years, it will probably be a $5-$10 billion company, transformed by the initiative to bring the supply chain home. 

If Trump wins the election, my guess is he will make more iconic American companies relevant again, as he has with Kodak.  Again, GE is name that comes to mind that, in the eyes of the administration, could be a symbol of American manufacturing renaissance.

In 2007, GE was a $425 billion company, the second largest company in the world. Thirteen years later, and GE is fighting for its life, worth an eighth of its peak value.  Billionaire Nelson Peltz has a large stake in GE, and we own it in my Billionaire’s Portfolio