MENOMONEE FALLS, WISCONSIN—He was wearing a muscle shirt and sweatpants… and strapped with a loaded handgun.
Brian Rafn looks like a CIA hitman. But I wasn’t there to hire him as an assassin. I came to the outskirts of Milwaukee to pick his brain.
Rafn is the manager of the Morgan Dempsey Small/Micro Cap Value Fund.
And as you can already probably tell, he’s no ordinary fund manager.
He doesn’t have a fancy downtown high-rise office. He works in a small building in Waukesha County, Wisconsin.
He prefers it that way.
He’s closer to the outdoors and farther from Wall Street.
But that doesn’t mean Wall Street ignores him.
Whenever CNBC needs a guy to talk to about guns (one of his largest positions is in gunmaker Sturm, Ruger & Co.), they call Brian.
For a while, his Power Hour appearance was the top-rated segment on the channel.
But when it comes to picking investments, he’s no gunslinger.
Before he puts his money in any company, he calls management and demands the last 30 years of the company’s financial statements. If they can’t provide that, he walks away.
Brian’s fund mainly invests in small industrial companies—the kinds President Trump has vowed to protect from offshoring.
So he was the perfect person for me to visit on my Rust Belt Tour. If anyone knows what’s happening on the ground in Middle America, it’s him.
Reshoring American Jobs
Brian makes no apologies about being a Trump supporter.
He’s a staunch Republican from one of the most GOP-leaning districts in the country. Waukesha County hasn’t supported a Democrat for president since 1964.
So I was expecting him to say President Trump’s policies would bring back American jobs.
Instead, he told me, “Jobs were already coming back before Trump took office.”
And the facts back him up…
We looked at some numbers from the Reshoring Initiative. The organization’s goal is to bring good-paying manufacturing jobs back to the United States.
So it has a grasp of what’s going on in this space.
Last month, the initiative released a study that found 27,000 more manufacturing jobs were brought back to America in 2016 than were offshored.
That was the first time the U.S. gained more manufacturing jobs than it lost since 2000. In that year, the U.S. lost about 220,000 jobs to offshoring.
Brian gave five reasons for the turnaround:
China’s cost advantage is shrinking. Chinese wages have risen from 25 cents per hour to about $3 per hour—a 1,100% increase over the years.
Consumers want their new tech gadgets faster. It takes a month or longer to ship from China. Products made in the U.S. can ship much faster than that.
Piracy. Chinese companies often replicate the products they make for American companies and sell counterfeit versions.
Automation is making it cheaper to make products in the United States.
It’s just the patriotic thing to do.
Although Brian said Trump isn’t the main the reason jobs are coming back, he agreed with us that if Trump’s “America First” policies do take effect… they’ll speed up the processes of reshoring jobs.
And this could jump-start a renaissance for American manufacturers.
How to Play the Trend
If you want to play the reshoring trend, Brian suggests buying small owner-operator companies. Studies show they tend to outperform over the long run.
The founders (or the families) of owner-operator companies still own a good chunk of their stock. And they’re likely still running operations, too.
These companies have fortified balance sheets—lots of assets and little debt. And Brian says that shows management pays attention to the finances and doesn’t take huge risks.
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. Next week, I’ll be visiting Indianapolis, where Obamacare regulations are causing businesses to shut down. I’ll follow that up with trips to Ohio’s steel country and the struggling metropolis known as Detroit.
If you’re in any of these areas and have stories to share, send them to us right here.
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