• Investing in supply chain chokepoints targets companies with irreplaceable, monopolistic advantages.
• Key investment opportunities exist in rare earths, AI-powered logistics, and critical energy infrastructure.
• Global reshoring trends may boost the value of domestic companies controlling critical supply chain links.
• Chokepoint stocks may offer durable advantages due to high switching costs and inelastic demand.

Finding Value Where No One Else Is Looking

Every so often, I get the feeling we’re all looking in the wrong direction. The headlines scream about the latest social media app or some electric car company that’s yet to turn a profit. It’s all very exciting, I suppose, if you enjoy a good rollercoaster. But for my money, the real, enduring power often lies in the places most people find dreadfully boring. It’s in the plumbing of the global economy, the bits and pieces that simply have to work for everything else to function.

The Unshakeable Allure of the Bottleneck

Think of it like this. You can have a hundred different taxi apps, but if they all have to cross the same bridge to get into the city, the person who owns the bridge is the one with the real power. They don’t care which car is winning the race, they just collect the toll. In the world of investing, these bridges are called supply chain chokepoints. They are companies that control an irreplaceable part of a process, a unique resource, or a piece of technology that an entire industry depends on.

This creates a rather wonderful situation for an investor. When your customers literally cannot operate without what you sell, you have a defensive moat that a castle would envy. Economic wobbles might see people buying fewer fancy gadgets, but the fundamental components needed to make those gadgets, or to power the factories, remain essential. It’s a quiet, stubborn kind of strength.

A Few Faces in the Crowd

Let’s look at a few examples. Take MP Materials. It’s not just another mining company. It operates North America’s only significant rare earth processing facility. These aren’t just rocks, they are the essential vitamins for modern technology, crucial for everything from electric vehicles to defence systems. With global supply chains looking increasingly fragile, having this capability on home soil makes it a strategic asset, not just a commercial one.

Then you have a company like Symbotic. It doesn’t sell anything you can touch, but it’s revolutionising the cavernous warehouses that power modern retail. Its AI-driven automation system is so deeply integrated into a client’s operations that ripping it out would be like performing a heart transplant on a running marathoner. Once you’re in, you’re in. That’s a powerful technological chokepoint. Even a less glamorous player like MRC Global, which supplies specialised pipes and valves to the energy sector, holds a critical position. When a pipeline needs a specific part, it needs it now, and it needs it from a supplier it trusts.

A World That's Coming Home

For years, the mantra was "cheaper is better", leading to sprawling, globe-spanning supply chains. Recent events have taught everyone a harsh lesson about the risks of that approach. Now, reliability is the new watchword. This shift towards bringing production closer to home, or "reshoring", could provide a significant tailwind for companies that form the critical links in domestic supply. These Hidden Monopolies may become more valuable as businesses prioritise security over shaving a few pennies off the cost.

Of course, let’s not get carried away. No investment is without risk. Companies that become too dominant can attract the unwanted attention of regulators with sharp antitrust teeth. And while a chokepoint might seem unassailable today, a clever bit of new technology could always create a bypass tomorrow. Investing requires a healthy dose of pragmatism, and acknowledging that even the strongest business can face headwinds is simply common sense.

Deep Dive

Market & Opportunity

• Companies controlling irreplaceable supply chain bottlenecks benefit from "inelastic demand," where customers have little choice on price.
• The trend of "reshoring" or "nearshoring" increases the value of companies that control essential links in domestic supply chains.
• As companies prioritize supply chain reliability, they are willing to pay premiums for security.
• The increasing complexity of the global economy and technological advancements are creating new chokepoint opportunities.

Key Companies

• MP Materials Corp. (MP): Operates North America's only scaled rare earth mining and processing facility. Its products are essential for smartphones, wind turbines, and other modern technologies, making it a strategic asset for U.S. supply chain independence.
• Symbotic Inc. (SYM): Provides a proprietary AI-powered warehouse automation system. The technology creates high switching costs for customers, such as major retailers, and improves over time through a network effect as more data is gathered.
• MRC Global Inc. (MRC): Distributes specialized pipe, valve, and fitting products essential for energy infrastructure, including oil, gas, petrochemicals, hydrogen, and carbon capture projects.

Primary Risk Factors

• Increased regulatory scrutiny or antitrust intervention as companies gain market power.
• Technological disruption that could make a company's products or services obsolete.
• Economic cycles and severe downturns can reduce demand, even for essential products.
• Currency fluctuations and geopolitical tensions can disrupt international operations and supply relationships.

Growth Catalysts

• The global trend of reshoring supply chains to improve reliability and security.
• National security concerns are driving demand for domestic alternatives to foreign suppliers.
• The need for automation to offset higher labor costs as manufacturing moves closer to home.
• Technological advancements, like AI, are creating new demand for specialized materials and infrastructure.

Investment Access

• Available through fractional share investing.
• Allows for diversification with minimal capital requirements, starting from small amounts.
• Enables dollar-cost averaging strategies to manage market volatility.