What exactly is a supply chain chokepoint?

A supply chain chokepoint is a critical point in the production or distribution process that cannot be easily bypassed or replicated. Think of it as a narrow gateway that everyone must pass through. Companies that control these chokepoints have enormous leverage because their products or services are essential, and customers have few or no alternatives. Examples include specialized manufacturing equipment, rare materials processing, or proprietary technologies that entire industries depend on.

Why are these chokepoint companies considered good investments?

These companies often enjoy exceptional pricing power and stability because their customers cannot simply choose a different supplier. This creates a durable competitive advantage or "moat" that protects their business. Even during economic downturns, demand for their essential products often remains steady. Additionally, as global supply chains face increasing scrutiny and reshoring efforts accelerate, companies controlling critical links become strategically more valuable.

What are rare earth minerals and why do they matter?

Rare earth minerals are a group of 17 elements used in many high-tech products and defense applications, including smartphones, wind turbines, electric vehicles, and military equipment. Despite their name, they're not necessarily rare in the earth's crust, but concentrated deposits are uncommon and processing them is complex and environmentally challenging. Companies that mine and process these minerals, like MP Materials mentioned in this theme, hold a strategic chokepoint position because these materials are essential for modern technology but have limited sources of supply.

How does the current push for reshoring affect these stocks?

Reshoring—the practice of bringing manufacturing back to domestic markets—has accelerated due to pandemic disruptions, geopolitical tensions, and national security concerns. This trend benefits supply chain chokepoint companies in two ways: First, as industries relocate production, they must secure reliable access to critical components, increasing the leverage of chokepoint providers. Second, companies that operate in "friendly" or domestic markets often gain preferential status as concerns about foreign supply dependencies grow. This heightened strategic importance can translate to increased business opportunities and potentially higher valuations.

15 handpicked stocks

Supply Chain Chokepoints

These companies control essential, non-replicable parts of global production that entire industries depend on. Carefully selected by our analysts, this collection features businesses with unique monopoly-like positions that give them exceptional pricing power and hard-to-beat competitive advantages.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17