Logistics as an Investment Guide

Can companies’ activities in logistics be a good indicator of investment opportunities?

Many investors are looking for companies that that grow very fast while being profitable. Fast track firms selling physical products likely outgrow their existing distribution network and need to expand to satisfy the demand for their products. If they can finance such an expansion with their own money, they are likely to also be profitable.

I know from experience that companies expanding their logistics networks or their warehouse capacities often have very good finances and that they in many cases would be good targets for investments. Though it is not a fully scientific way of proving a theory, I have structured the unsolicited inquiries that Establish received last year about new warehouse designs or expansions of distribution networks. Companies that we knew from previous years are exclude to remove that bias.

The resulting list of fast growing profitable companies says a lot about which industries are expanding and the age we live in:

  • Developers of equipment for virtual reality experiences.

  • Manufacturers of 3D printers.

  • Pharmaceutical companies, in general but with an over-representation of vaccine and natural products.

  • Suppliers of guns and ammunition. These companies are not primarily catering to the military or the hunters…

  • High quality, very specialized products that have previously been imported from Germany and Scandinavia, but where the production is gradually moving to the US.

  • Companies in different industries that are using the concept for Delayed Differentiation or Postponement by importing generic pieces from low-cost countries and assembling and customizing the products in the USA. Few SKUs in and many different items out.

  • Suppliers of equipment for greenhouses. From Oregon and Colorado…

  • Sports goods; highly specialized Cross-fit and Lacrosse equipment

  • Suppliers of merchandise around movie franchises

  • Makers of craft beer and whiskey

  • Specialized logistics solutions for target industries such as expensive art to frozen food

  • Companies that handle “The Long Tail” of low frequent products for companies that want to focus on their best sellers but need to provide availability of the other items in their assortment

What do you think?