It is shifting supply chains out of China where possible, and redesigning products to avoid Chinese components where it isn’t.
Whitney Tilson’s email to investors discussing his visit to Lumber Liquidators Holdings Inc (NYSE:LL) headquarters; Trade War Starts Changing Manufacturers; GSEs return to private ownership; Warnings in the bond market.
1) This New York Times article resonated with me because it was exactly what I heard yesterday when I met with the CEO of Lumber Liquidators (LL), Dennis Knowles: Trade War Starts Changing Manufacturers in Hard-to-Reverse Ways. Excerpt:
[bufffett]
Q1 hedge fund letters, conference, scoops etc
Nearly a year later, the trade war shows no sign of cooling off. So ControlTek, the electronics manufacturer that Mr. LaFrazia runs near Portland, is taking steps to protect itself, a strategic shift that has been repeated in boardrooms and executive suites around the world in recent weeks.
ControlTek is rewriting contract language to make it easier to pass the cost of tariffs on to its customers. It is shifting supply chains out of China where possible, and redesigning products to avoid Chinese components where it isn’t. And as a tiny player in an enormous global industry, it is discovering that there is only so much it can do…
Tariffs have not yet compelled businesses to return large-scale production to the United States, where labor and other costs tend to be much higher than in China and other overseas manufacturing hubs.
But trade tensions are accelerating a corporate trend of shifting supply chains away from China.
In the next issue of the Empire Investment Report, I’ll share what I learned from Knowles and his team during our two-hour meeting and why I think LL stock is deeply undervalued. Click here to get started with your 30-day, risk-free trial.
