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Friday, April 26, 2013

The Secret to America's Recovery

English: MOBILE, Ala. (Aug. 31, 2011) Chief of...
English: MOBILE, Ala. (Aug. 31, 2011) Chief of Naval Operations (CNO) Adm. Gary Roughead tours the littoral combat ship Coronado (LCS 4) under construction at Austal USA Module Manufacturing Facility in Mobile, Alabama. (U.S. Navy photo by Mass Communication Specialist 2nd Class Shannon Eve Renfroe/Released) (Photo credit: Wikipedia)
By Investment U

Washington, Apr.26, stock tips .- It all started a few years ago with a handful of courageous companies. It has quietly gained momentum in the years since.

This phenomenon is so new, so off the beaten path, the mainstream press isn't writing about it. There's no government agency to track it.

In fact, experts can't even agree on what to call it.

Washington's political gridlock and even Europe's financial woes don't have an effect on it. But it's about to shift the tepid U.S. economic recovery into high gear.

It's been referred to as onshoring, reshoring and backshoring. The influx of companies bringing manufacturing jobs to American soil is truly the wild card in the U.S. economic recovery...

Last week, I told you about "The World's Newest (and Hottest) Emerging Market" - America. I wrote about American companies repatriating manufacturing plants and bringing the jobs that come with them to Middle America.


In this week's installment, we're going to look at a handful of foreign companies that are coming to America. They're breaking ground (literally and figuratively) on U.S. soil, some for the first time.

All of them are building new manufacturing facilities here. Many of them are in Middle America. We'll take a look at who they are in a moment.

Why Here? Why Now?

First, let's look at why they're coming. It all started with the damage that was done to the American manufacturing sector during the Great Recession of 2007-2009.

By the time the crisis was over in 2009, $14.5 trillion of global company value had vaporized.

And according to Reuters, of the 14 million U.S. manufacturing jobs that existed prior to the recession, 1,985,000 of them were lost. But get this: Data shows that every manufacturing job creates as many as eight downstream jobs.

That adds up to 15.9 million jobs that disappeared in just three years. There is no doubt having them back would be a boon for America's economy.

Imagine having that many people off the government dole. They'd fill federal, state and local tax coffers with sorely needed dollars - and go a long way toward solving America's debt woes.

The reason foreign companies are coming here should now be clear.

There are plenty of well-trained Americans looking for work. Just about every state in the Union is rolling out the red carpet. But few are better suited than those in America's heartland.

Major Change on the Way

Two hundred fifty years ago marked the start of the U.S. Industrial Revolution. It was a major turning point in our nation's history. Nearly every aspect of life in America changed in some fashion.

What was most notable?

According to Nobel Prize recipient Robert E. Lucas Jr., "For the first time in history, the living standards of the masses of ordinary people have begun to undergo sustained growth... Nothing remotely like this economic behavior has happened before."

The new American manufacturing renaissance, happening right in Middle America, promises to do the same thing... all over again.

The original Industrial Revolution was fueled by the transition from wood to coal. The new one is fueled by cheap oil and natural gas made available by horizontal drilling and hydraulic fracking.

Oil and natural gas are the main feedstock components for many manufacturing companies. Having a cheap supply of both in one place seems like an idea pulled from an economic fairy tale. It's a dream scenario.

Add to the idea America is home to one of the greatest transportation infrastructures on the planet, and you have the recipe for a great manufacturing boom. Not to mention that all of this is located in the heart of the world's largest consuming economy. Bingo!

The List Grows...

So who is coming from the Far East to take advantage of Middle America's energy advantage?

Some Asian companies are already here. Toyota Motor Corporation (NYSE: TM), Nissan Motor Co. Ltd. (OTC: NSANY) and Honda Motor Co. Ltd. (NYSE: HMC) all have plants here in the United States.

Nissan has nine facilities, seven of which are located in Middle America. Three of Toyota's six facilities are in Middle America states. Honda's been here since 1979. It has 32 facilities in the U.S. making cars, ATVs, power equipment and motorcycles. Eleven of those are in America's heartland.

One of China's biggest electronics manufacturers, the Lenovo Group Limited (OTC: LNVGY), currently operates a fulfillment center in Whitsett, N.C. But to our theme, it plans to begin manufacturing operations there this year.

Austal Limited (OTC: AUTLY) is an Australian-based shipbuilding company. Its Austal USA unit, located in Mobile, Ala., is one of the most advanced shipyards in the world. Its U.S. business is growing so quickly its workforce has surged from 800 to 3,300 in just the last two years.

Austal USA is one of the few offshore prime contractors for the U.S. Navy. Last year, its USA operations accounted for 87.3% of the company's total revenue. Two U.S. Navy contracts totaling $5.1 billion will fuel revenue and earnings through 2016.

Austal Limited is in the midst of a transformational strategy. When finished it will improve its long-term profitability and competitiveness in the commercial shipbuilding market.

It's clear that Middle America's cheap and abundant energy is attracting a variety of companies. Not just from Asia, but from Australia as well. Both Lenovo and Austal are two companies investors should consider adding to their portfolio.

In our next installment, we're going to take a look at even more foreign companies opening up shop in the U.S. These are coming from a completely different direction, but for the same reason. Stay tuned...
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