Flipping through a back issue of BusinessWeek, I happened upon a blurb about a T-shirt being sold by J.C. Penney (NYSE: JCP ) over Memorial Day weekend (I'm a little behind on my reading, so sue me). The T-shirt was emblazoned with "American Made" across the front, along with a very patriotic-looking design.
As it turns out, the T-shirt was not American made -- it was made by our neighbors in Mexico.
Begin the finger-wagging
An opportunity like this was too good to be passed up by those with a vested political interest. The issue was originally brought to the attention of the Alliance for American Manufacturing by a retired clothing manufacturer in Texas, but then quickly taken up by folks like the AFL-CIO.
J.C. Penney asserted that the issue was a misunderstanding -- the slogan on the shirt referred to the wearer of the shirt, not the shirt itself. I guess I had no idea about the level of nuance involved in T-shirt slogans these days.
Now take that finger somewhere else
There are plenty of places you can go to discuss the political implications of something like this. This isn't one of them. It's not that we don't care, it's just that we care more about what this means for your portfolio.
The struggles of American textiles and manufacturing are nothing new. In fact, even the great Warren Buffett had to learn the hard way how cutthroat that world is.
Though Berkshire Hathaway (NYSE: BRK-A ) is now a thriving conglomerate of insurance companies and other top-flight businesses, it was once a textile business making things like suit linings. When he took over the company, Buffett tried mightily to keep Berkshire's textile business afloat, but there were only so many years in a row that he could watch those operations bleed cash.
Eventually, Buffett gave up on Berkshire's textiles and focused on buying other companies that did have a competitive and lasting business model. These were businesses like See's Candies, GEICO Insurance, and Nebraska Furniture Mart -- not to mention major holdings of stocks like Coca-Cola (NYSE: KO ) , American Express (NYSE: AXP ) , and Nike (NYSE: NKE ) , a known manufacturing outsourcer.
Go with the flow
Supporters of American manufacturing will no doubt decry the advice I'm about to give, but investors will be best served seeking out companies that either cannot be outsourced -- you can't outsource a restaurant like Buffalo Wild Wings (Nasdaq: BWLD ) -- or are making the most of the ability to find cheaper sources of supplies and labor overseas.
I certainly don't relish the fact that there are folks around the country being hurt by the changing economic landscape. However, change is a force that's not easily stopped, and our overall economy will benefit more from embracing and harnessing the change than from fighting it tooth and nail.
Take the case of Apple (Nasdaq: AAPL ) , for instance. Where does the magic of the iPod come from? If you ask me, I'd say the technology, the sleek and straightforward design, and the fantastic marketing and branding. These higher-value-add operations are done by Apple's U.S. operations and have helped lead to success and high profit margins.
The manufacturing of the iPod, on the other hand, which simply brings together the higher-level technology and design, can be done effectively and cheaply through a manufacturing partner in China.
Combine those two parts and what you end up with is a thriving company that can hire more Americans to do high-level things like research and development, sell quality products at very reasonable prices, and deliver great results for its investors.
Made right here on Earth
Regardless of what J.C. Penney says, the hypocrisy of selling a Mexican-made shirt that says "Made in America" is not lost on me. However, I don't think that investors can afford to be quite so picky about how a company chooses to take advantage of the global marketplace.
My fellow Fool Todd Wenning put pen to (digital) paper yesterday, urging that investors start buying American again -- that is, stocks of American companies. I agree 100% with Todd, but also believe that investors will be best served by showing preference to companies that are leveraging the competitive advantages of other countries to become even more efficient and profitable themselves.
Speech is free in this country, so let me know what you think in the comments section below.
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