| From the Desk of Don Yocham:
Increasing Supply Chain Complexity is a Boon for Logistics
Global supply chains are in complete disarray.
COVID-19 policies such as rash stimulus policies, travel restrictions, shutdowns – to name but a few – have completely changed the pattern of consumer and business demand.
Plus, with ESG mandates and infrastructure initiatives creating scarcity for goods as basic as oil and gas and novel as rare metals, moving goods around the world has taken a quantum leap in complexity.
I do see a world where many and possibly most products get sourced and manufactured locally, but it will take years for such a reality to arise. Decades of hyper-globalization have distributed labor, capital, and finite resources in concentrated pockets around the world.
Unwinding those complex supply lines will drive demand for logistics services to levels far higher than they have achieved in the past.
And one company I've found is positioned perfectly to mint money from manufactured chaos… Expediting Goods Around the World
That company is Expeditors International of Washington, Inc. (NASDAQ: EXPD).
It's a large cap company, with a $20 billion market cap at its current $121 stock price. And have been providing logistics services since 1979.
They have a truly global footprint serving the Americas, North Asia, South Asia, Europe, the Middle East, Africa, and India.
Their services cover the entire logistical supply line and all modes of transportation including air freight consolidation and forwarding; ocean freight consolidation, direct ocean forwarding, and order management; customs brokerage, intra-continental ground transportation and delivery. It also covers warehousing and distribution services; and customs clearance, purchase order management, vendor consolidation, time-definite transportation services, temperature-controlled transit, cargo insurance, specialized cargo monitoring and tracking, and other supply chain solutions.
The list goes on. And with over 18,000 employees, they cover the globe.
The management team has always kept the shareholder in mind. They have consistently provided a return on capital of around 30% - they are middle-men with a capital light business model. And their economic profit margin as a percent of sales historically lands within the top third of U.S companies.
But with COVID-19 throwing a monkey wrench in global supply chains, their revenue jumped nearly 50% higher over the last year. And for a 40-plus year-old company, the management is surprisingly light on its feet.
Flexing Flexibility
What impresses me most is how quickly the company adapted.
The company's cost of goods sold remained steady at 86% - speaking directly to the adaptability of a service heavy, capital light business model. While that 30% return on capital surged to over 50%.
That equates to less than a two-year payback on any capital invested in the company today (1 year, 5 months and 8 days to be precise).
Moreover, the current $121 price tag reflects absolutely zero growth in profitability despite the better than even odds of demand only growing from here.
Even at 10% revenue growth from here on out, I estimate the stock to be worth $147 per share. But I'm betting on upside surprises. We can expect the next earnings release on November 2. The company has routinely exceeded street estimates over the last year and another positive surprise could prove just the right catalyst to move the stock past the $150 level.
So, consider the stock a buy. But to truly get the most out of this near-term setup, there's another trade I think you should consider… | 
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