One easy method to examine any company is did they do what they say they would do or how is there execution of strategy. When the strategy is released it looks good or if you do not think it looks good you should quickly find alternatives or have enough shares to change management. Strategy is a key reason why as a shareholder you pay the senior executives higher than normal compensation packages, so how is being executed?
Every company has a logistics concern, in the northeast as this is being written it is snowing or weather is a concern. In the automotive world, every new vehicle has at least 100 chips it in, at the moment there is worldwide chip shortage because of demand due to the COVID adaptions companies had to make and people using gaming more than in the past. At GM the largest of the companies making internal combustion engines, Chief executive Mary Barra said GM will not lose any production of its high profit full size pickup trucks and SUVs, although the supply of computer chips is a bit fluid.
In an article by Ben Klayman and Paul Lienert of Reuters, the shortage of computer chips which is called fluid could shave up to $2 billion from 2021 profits. GM reported a 4th quarter profit of $2.8 billion.
If you want a GM car, there are production cuts at North American plants and rival Ford has lost some production of its high profit top selling F-150 pickup truck.
Similar to every large organization taking a stake in a computer chip company or increasing its horizontal leverage is an option. Do you make the parts yourself? outsource them, but be the biggest customer? or take your chances in the normal sourcing of parts?
Linking to dividend paying companies, profitable companies have various strategies to deal with the above questions to determine how the company maintains its ability to make profits and pay dividends. All companies go through the options, as extraordinary few companies do everything in house, they use the products of another company to add value to what they do. One method to investing is try not to invest in the final product but who are the suppliers to the company? There are always different methods to invest.
There are more questions than answers, till the next time – to raising questions.