American businesses are excited about a hot new trend. And it’s not AI.
A recent Bank of America analysis of earnings call transcripts revealed that companies mentioned “artificial intelligence” 85% more than they did last year.
But another term was up 128% from the year before… “reshoring.”
Reshoring is the moving of manufacturing back to the countries where the products are sold.
For decades, American businesses have been sending jobs overseas where labor was cheaper. China and other Asian countries were major beneficiaries of this outsourcing.
Back home, the loss of those jobs hollowed out the middle class and sent parts of the country – known as the Rust Belt – into decline.
But now, a new wave of manufacturing is coming back to the U.S.
Here at Intelligent Income Daily, we’re focused on finding the safest income investments on the market. And investing in companies that support major trends like reshoring is a great way to ensure reliable profits.
Today, I’ll share three reasons companies are bringing manufacturing back to America. Then, I’ll show you one way you can cash in on the trend.
Jobs Are Coming Back to America
The Reshoring Initiative is a non-profit that supports U.S. companies bringing jobs home.
It estimates companies bringing manufacturing back to America will create more than 400,000 jobs.
Jobs have been returning to U.S. soil over the past decade. But the trend took off in the past few years.
In a survey by Swiss investment bank UBS, 70% of business leaders now say they plan to move parts of their supply chain closer to home.
One reason is to address the pain points that surfaced during the pandemic. Business leaders highlighted how hard it is to rely on making goods and shipping them halfway across the world.
After seeing their orders delayed for months, companies decided they needed to bring manufacturing closer to where they were selling their products. This allowed them to quickly respond to changes in demand and avoid disruption.
Another reason is American consumers have shown a willingness to pay for higher-quality products. Manufacturing at home is more expensive due to higher labor costs. But that means companies can make better products that people are still willing to buy.
Finally, the government has been encouraging businesses to bring manufacturing back to ensure America stays competitive in key industries like semiconductors and electric vehicles.
And it’s putting its full backing behind this.
The CHIPS Act provided $39 billion in funding to set up new factories for producing advanced computer chips. And the Inflation Reduction Act gave up to $7,500 in tax credits per electric vehicle made in America.
These initiatives and habits show that reshoring is only going to ramp up in the coming months.
How to Profit From the Reshoring Trend
With all this money and profit-making up for grabs, we want to make sure we’re ready to benefit in our portfolios, as well.
One way to cash in on the increase in manufacturing activity is by investing in transportation companies.
Factories need to use a lot of raw materials. And the finished products must be moved to the places where they are sold.
That means increased demand for sectors such as railroads, trucking, and airlines that carry freight.
One simple way to add transportation companies to your portfolio is through the iShares Transportation Average ETF (IYT). It pays a 1.3% yield. Over the past three years, this ETF has beaten the S&P 500 by 12%. That matches up with the recent increase in jobs from reshoring.
But there’s also a better way to play the reshoring trend.
At Wide Moat Research, we’ve published an in-depth report, “Reliable Income from America’s Transportation King” for members of our flagship Intelligent Income Investor advisory.
We recommend a company playing a key role in the re-industrialization of America. It owns billions of dollars of critical infrastructure and has been growing its dividend at a double-digit pace for 16 years.
This company could produce 15% annualized returns over the next few years. Those kinds of returns outpace inflation and can help investors sleep well at night.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily