PREMIUM: Supply Chain Relationship Exposure Scores (TSLA)

Yahoo Finance Premium has partnered with Nasdaq and Yewno to integrate supply chain relationship exposure scores. This data is typically difficult to procure because there are no mandated supply-chain disclosure requirements for global companies, and the SEC does not require suppliers to be disclosed. Yewno’s Relationship Exposure Scores (powered by Nasdaq) use a network-based approach to identify the strength of connections between companies. Their supply chain data extracts company insights from millions of unstructured documents, exposing supplier/customer relationships and allowing investors to quantify hidden risk exposures.

Supplier and Customer relationships are ranked by economic value, media exposure, and financial exposure. Each metric offers a different perspective on the strength of the connection and the degrees of interdependency.

Economic Value: Measures how much the supply chain connection could be worth in dollars. When the supply chain connection is publicly disclosed as a percentage of revenue or cost of goods sold, Yewno converts this percentage into an actual dollar value. When the relationship is present but no value is provided, Yewno provides an estimate of the value of the connection.

Media Exposure: Measures the media prominence of supply chain connections to the company. Companies that are often mentioned together in news statements have a higher media exposure score, often reflecting significant market events.

Financial Exposure: Measures the financial interdependence of supply chain connections to the company. This metric is based on a combination of the comovement of security prices and the relative length of the supply chain relationship.

Total Exposure: An aggregate measurement of the relative importance of company supply chain connections, taking into account the economic exposure, media exposure, and financial exposure scores to produce the final ranking.

Let’s explore Yewno’s Relationship Exposure Scores in action, using Tesla as an example. Begin with a search on Tesla and select the Company Outlook tab.

Scroll down to locate the Supply Chain section. Supply chain connections are ranked by relative economic value, with the top five suppliers on the left-hand side of the tree and top five customers on the right. Click on the chart to see a larger list of connections ranked by economic value. If you are looking to invest in companies exposed to next-generation automobiles, this might be a good place to start. The top suppliers range from Indorama Ventures, a leading petrochemicals company, to Hyundai Mobis, a top automotive supplier, to Panasonic Corporation – which produces all sorts of electronics and hardware components including batteries. Even though these companies may be economically exposed to Tesla, this doesn’t necessarily mean that their business is significantly correlated to Tesla. Many of these suppliers sell goods to a large number of automotive companies ranging from Ford to Kia. Note that these connections will change over time as new relationships are constantly updated — the data presented in this article is from today, August 15, 2019.

Another way to identify companies deeply correlated to Tesla’s business would be to sort the supply chain connections by financial exposure.

The chart below shows Tesla’s stock price along with the top supplier and top customer as ranked by financial exposure (AB SKF and J.B. Hunt Transport Services, respectively). Over the past 5 years, these companies have consistently traded together, likely being influenced by similar macro-economic factors or due to the strength of their longstanding relationships with Tesla itself.

Another sort option is by media exposure. Tesla has been the target of a significant amount of media coverage for a number of reasons, and as a result, Tesla’s suppliers and customers can often share the media spotlight. The supply chain connections ranked near the top by media exposure are often companies you should be paying close attention to.

Tesla’s relationship with Panasonic has been particularly newsworthy. A search for recent news articles about the relationship indicates that this significant supply chain connection may soon end.

And if all of this is too much to take in at once, simply sort the supply chain connections by total exposure. Sorting by total exposure will give you a summarized list of significant companies for your further research, taking into account all of the previously mentioned factors.

Supply chain exposure is one of many alternative data sets available through Yahoo Finance Premium. Click here to start your free trial* and step up your investing.