Stock Groups

Morgan Stanley picks stocks amid supply chain crisis


On November 22, 2021, cargo containers were stacked up on a ship in Bayonne (New Jersey).

Spencer Platt | Getty Images

Morgan Stanley reported that the majority of acute supply chain disruptions were already under control and should be fully addressed by 2022’s first-half. 

This is the basis case that the bank presented in its recent assessment of the global supply chain and the risks it faces.

The supply chain crisis of this year has been devastating for companies. There were bottlenecks and insufficient industrial production to keep up with the demand spike after the pandemic. Energy shortages in China and EuropeThe huge supply chain squeeze has been caused by both Covid lockdowns as well as a lack of Covid.

Even though the world continues to assess supply chains, they remain highly vulnerable. the risk of new omicron strains, Morgan Stanley said.

“However, orders have surged“Increased anxiety over sourcing products, this inflates backlogs, setting the scene for an even sharper-than-expected short term unwind, especially for consumer electronics, and segments facing demand destruction risc,” analysts at the bank wrote in their Dec. 14 report.

Morgan Stanley predicts that logistic costs will continue to be “significantly more expensive” in 2022 and remain so throughout the year. Travel restrictions, such as quarantine, are not likely to be relaxed for important transcontinental routes. They will remain in place through 2022. However there is limited capacity before 2023.

Morgan Stanley cautions companies that produce tech hardware against those who have a high backlog and limited visibility as to when the demand will rise. It prefers to see semiconductor businesses exposed to both industrials and automobiles.

Stocks are critical to supply chain success

The investment firm identified companies it says are “regional champions,” “recognizing their importance to supply chains and the role that policymakers may play … to support their position against competitive pressures from other spheres of influence.”

CNBC Pro stocks picks and trends in investing

Companies squeezed by bottlenecks

Morgan Stanley listed also the top-pressured companies that were affected by supply chain disruptions.

According to the firm, “Industries falling into this category are those most sensitively transmitting the squeeze on supply chain pressures. This is partly because these companies face continued reliance upon labor inputs in the face of increasing automation or capital investments.”

This, together with other factors, such as the reliance upon markets that are subject to trade frictions or geopolitical dynamics, “leaves such businesses vulnerable to both geopolitical, labor, and global supply chain dynamics,” the report said. Container shipping, and firms that produce semiconductors are just two examples.