The Manufacturer's Agenda: In Search of Stable Ground

In the late ’90s boom years, investing in tech stocks was simple. Money-losing companies became worth billions overnight, and the ones that managed to swing a profit were worth even more. With my meager savings, I bought a handful of shares of Advanced Micro Devices (No. 93 on this year’s IW U.S. 500, see page 10). AMD had great computer chip designs in the late ’90s but couldn’t produce in profitable volumes. From 1996 to 1999, it lost $283 million.

I (correctly) assumed that AMD had learned from its mistakes. The 1999 Athlon chip launch succeeded where the K5 and K6 failed, and AMD swung from four years of losses to a nearly $1 billion profit in 2000. (Full disclosure, I no longer own AMD shares or direct stock in any manufacturing company.) Those were early days in internet investing, with message boards and chat sites offering fact, speculation, opinion and deception. Today’s hyper-aggressive dudes trying to convince you to buy crypto and NFTs? Their predecessors were hyping tech stocks on Yahoo and AOL message boards.

AMD shares fluctuated wildly in those days as investors reacted to real news and whispered rumors. When a shareholder complained of whiplash, one of the more aggressive hype men said tech was for people looking for high risk and higher rewards. If you wanted stability, invest in energy.

I wonder what that early internet troll would think about today’s energy market. As I collected data for this year’s IW 500, the dominance of energy stocks was clear. When you produce something that shoots up in value, you make more money—no real surprise there. But the scale of gains has been dramatic, even if predictable.

Oil companies sold $1.2 trillion worth of goods in 2021, up nearly $500 billion from the previous year. Exxon Mobil, Chevron, Marathon and others earned a collective $98 billion. Those massive gains led to calls for a windfall tax on oil profits in Washington as lawmakers looked for someone to blame for rampant inflation.

You probably didn’t hear calls for windfall tax refunds to oil companies in 2020 when they lost a collective $120 billion—as lockdowns stopped people from driving, and the future price of oil was negative for a brief period.

Anyone expecting stability this year hasn’t been paying attention. Inflation that rose sharply throughout 2021 has spiked even more this year. Add to 2021’s challenges Russia’s invasion of Ukraine, an early and devastating start to the wildfire season and continued supply chain catastrophes, such as the one that led to infant formula shortages.

Overall results from this year’s IW U.S. 500 are overwhelmingly positive, and critical manufacturers have expressed guarded optimism for the rest of the year. Automakers expect chip shortages to ease, allowing them to boost production, for example.

But, the inflationary forces that drove growth appear to be hampering some sectors of the economy as well. With energy stocks fluctuating more wildly than tech, stability could be the scarcest commodity in the world this year.