“It’s the supply chain, stupid.”

  • My open note to U.S. Fed Chair Jay Powell.

I never bought into the whole “inflation-is-transitory” call by the U.S. Federal Reserve.

I knew that assessment was wrong – dead wrong, in fact. I knew that inflation is actually “structural” (i.e. “sticky”) and here to stay. And I said so … openly – during appearances on Fox Business News and here at Total Wealth Research in my talks with you.

The Jay Powell-headed Fed clearly doesn’t get it.

That’s creating risks to the U.S. economy – huge risks.

But it also creates major trading-and-investing opportunities for us – windfall-magnitude opportunities, in fact.

To reap that windfall, you need to understand both types of inflation – and see the difference.

Today I’ll show that to you, what comes next – and one stock to grab now to profit.

The Root of Inflation

In a news conference back in March, Fed Chair Powell said the Great Reopening could bring about price-spiking bottlenecks in the supply chain but dismissed these as “one-time increases [that] are likely to only have transient effects on inflation.”

In other words, any inflationary pressures would be “transitory” – fleeting in nature.

Even then, I labeled these increases as “structural” – a longer-lasting inflationary uptick resulting from meaningful changes in the composition of supply or demand.

The concept of transitory inflation became a mantra for Powell – and a wrong-headed one, at that.

I mean, starting in March, the Fed correctly noted that a quick bounce-back in spending triggered by resurgent economic growth would create “supply bottlenecks.” So how could central-bank policymakers not also see that deeply-embedded supply chain problems were the root cause of spreading inflation?

That’s the textbook definition of “structural” inflation.

And it’s only going to get worse.

Shipping lanes are clogged with fully laden cargo ships that can’t get into (and be unloaded in) America’s understaffed ports.

And when those ships finally are offloaded – often months or more behind schedule – they don’t have time to pick up empty containers if there are no loaded containers on the docks to be exported. They’re moved out of the way so the next ship can get unloaded.

And that’s just one example of the supply-chain problems that – until fixed – will just continue to fuel the inflationary blaze.

The AI Breaking Down Supply Snarls

You can see my thinking here.

The bugaboos in the supply chain are creating major swoop-in/cash-in investment avenues for us to play.

And those opportunities are both near-term and long-term in nature. By that I mean:

  • In the near term, we can turn the shortages to our advantage. For instance, we know there are shortages in shipping containers and cargo ships. So we can track down the companies best-positioned to fill those needs during the supply-chain squeeze – shipping companies are a great example, since shipping rates have skyrocketed – and make hay there.
  • And, in the long run, we can ID the supply-chain glitches that will require major outlays to fix – and put our money with the investment and revenue beneficiaries. Take the shortage of ships. Far too many are stuck in transit lanes or outside of ports, and others are being used as “floating warehouses.” Mitigating that shortage is a longer-term proposition – as we watch for ship construction to pick up. Here we’d be looking at shipbuilders, steel suppliers, and the makers of the reciprocating-diesel engines that power these vessels.

We’ll make our first move today – with a shortage play of our own.

The company I’ve got my eyes on is also being watched by eight Wall Street rating firms, six of which have determined that the company is a screaming buy – and I agree.

Manhattan Associates Inc. (Nasdaq: MANH), a $9.6 billion market cap monster, creates specialty software that smooths over the logistical issues that cause supply-chain disruptions. It serves more than 1,200 customers worldwide, allowing for incredible shipping speeds of over 8 million miles across four oceans and six continents.

To pull that off, Manhattan specializes in applied artificial intelligence and machine learning. As more aspects of our global supply chain become automated, they need to communicate with each other and learn from experience in real time. The smarter the tech, the fewer supply chain snarls.

As the company puts it, humans are no longer fast enough to handle all the logistical information required to keep supply bottlenecks from happening – so its software steps in to fill that gap.

In Manhattan’s last earnings call, it revealed that it topped estimates again. Its third-quarter marked the fourth consecutive quarter that MANH had beat earnings-per-share estimates.

And its revenue isn’t looking bad either. Based on the last twelve months, total revenue is 9% greater than the annual revenue reported Dec. 31 last year. Its currently looking at a 17.25% profit margin, which translates into fat profits, clearly evidenced by its year-over-year 46% quarterly earnings growth.

Since inflation isn’t abating until supply chains get straightened out, which will take years given how much infrastructure has to be upgraded, updated, or completely replaced and reinvented, investing in companies like Manhattan Associates is a no-brainer.

Don’t be stupid. There’s a ton of money to be made on supply chain fixes.

Have a great weekend,

— Shah Gilani

Source: Total Wealth