The hidden supplier concentration in long/short books
Ten positions that look diversified by ticker can lean on the same three suppliers. Here is what a demo long/short book really depends on once every position is mapped to its suppliers and customers.
rejo research ·
Risk reports describe a book by sector, factor and country of listing. None of those show what the businesses depend on. Two semiconductor longs and an equipment long can be three tickers in three sub-industries and still depend on the same foundry; a consumer long and a consumer short can both sell a large share of their volume to the same retailer.
To make that visible we took a simple demo book of 10 positions across semiconductors, consumer staples and autos and mapped each one through rejo's supply graph: its suppliers and customers, plus its suppliers' suppliers at reduced weight.
| Position | Side | Weight |
|---|---|---|
| NVDA | long | 6% |
| AVGO | long | 4% |
| LRCX | long | 4% |
| MU | long | 3% |
| INTC | short | 3% |
| HSY | long | 3% |
| MDLZ | short | 2% |
| PEP | long | 3% |
| KO | short | 3% |
| TSLA | short | 2% |
What the book really depends on
Adding up the dependencies, 49% of the long book leans on TSMC (through NVDA, AVGO, LRCX, INTC, MU, TSLA), against 11% of the shorts. The next driver is Samsung Electronics: 45% of longs, 11% of shorts.
| Driver | Longs | Shorts | Net |
|---|---|---|---|
| TSMC | 49% | 11% | 37% |
| Samsung Electronics | 45% | 11% | 34% |
| SK hynix | 38% | 10% | 27% |
| Alphabet | 37% | 9% | 28% |
| Microsoft | 31% | 12% | 19% |
| Cisco | 34% | 8% | 26% |
None of this appears in a sector breakdown. A foundry outage, an export restriction or a capacity shift would hit a large part of the long book at once, and the shorts offset only a small part of it.
Shorts that don't hedge what you think
The book's shorts were chosen as sector hedges. Mapped through the graph, several of them hang on the same drivers as the longs: TSMC (longs NVDA, AVGO, LRCX, MU; shorts INTC, TSLA); Samsung Electronics (longs NVDA, LRCX, AVGO, MU; shorts INTC, TSLA); SK hynix (longs NVDA, LRCX, AVGO, MU; shorts INTC, TSLA). Whether that offset is wanted depends on the thesis; the point is to see it.
Geography behind the positions
Weighting each position's direct suppliers by country, Taiwan accounts for 12% of the long book's supply base against 1% of the shorts, a tariff or geopolitical exposure that country-of-listing data doesn't show.
From map to P&L
Because rejo measures how much a move at one company reaches each kind of linked company (see our five-year study), a shock to any driver can be translated into an estimated P&L by position, with the path that carries it. That is the Book X-ray's shock simulator.