Structural durability (Keystones)
Kereon's 0–100 reading of how much of the identified supply-chain network depends on a company, and how hard that company would be to replace.
Flow ranks, under Critical nodes on Exposure (Across the network), every company that another company in the network is identified as depending on. Each dependency is read from an annual report (10-K, 20-F or 40-F) on SEC EDGAR, and is weighted by what the sentence says. A single source counts more than a stated share of an input. A stated share counts more than "all" or "most" of something, and any of those counts more than a supplier that is only named. A dependent naming its supplier in its own report counts more than a supplier listing its customers. The score combines four parts. Each part is left out, not set to zero, when nothing under it is known.
Formula
Durability = Σ(weightₚ × partₚ) ÷ Σ weightₚ over the parts present Range = Σ(weightₚ × partₚ) + 100 × Σ(weights of missing parts), from all missing at 0 to all at 100 Weights: importance 35%, replacement 30%, barriers 20%, concentration 15%
Inputs
- Systemic importance. 0.35 × network centrality + 0.30 × weighted dependence + 0.15 × reach + 0.20 × industries served. Centrality is a PageRank weighted by dependence, with the company's own starting weight removed, as a percentile. Weighted dependence is Σ(link weight × (0.5 + 0.5 × the dependent's revenue percentile)), scaled as 1 − e^(−x/2.5). Reach is the companies downstream within four steps, scaled as 1 − e^(−n/10). Industries served is the distinct industries among those companies, scaled as 1 − e^(−n/4).
- Supply concentration. The highest of: a market share the company states itself; 0.8 × the median of the three largest shares its dependents report taking from it; or a position it claims (sole 85, largest 65, one of few 60, among the largest 40, each lower when it is limited to a region or a segment). Left out when none is stated.
- Difficulty of replacement. 0.4 + 0.6 × replacement signals − 0.45 × substitutes, clipped to 0–100. The signals are single-source dependents, dependents that say replacing it would be difficult, the longest replacement time they state, and the strength of its claimed position. The substitutes are the share of dependents that name a second supplier of the same thing, and the competitors the company names. Left out when there is no signal at all.
- Competitive barriers. The mean percentile, among ranked companies, of reported gross margin, operating margin, return on invested capital, R&D intensity and capital intensity. Each figure needs at least five ranked companies that report it, and the part is left out with fewer than two figures.
- Sureness. High: at least three other companies disclosed the dependencies, three parts are present and at least 60% of dependencies are disclosed rather than inferred. Medium: two other disclosers, or one with three parts present. Low otherwise.
How to read it
Higher means more of the identified network leans on the company, through links that are harder to replace. The range matters as much as the score. A wide range means parts are missing and the score could move a long way once they are known.
How to use it
Use it to find companies the economy is quietly built on, which are often suppliers and infrastructure rather than household names. Then open the drawer and read the sentences behind each link.
Limitations
It ranks structural position, not investment merit. It reads no price, valuation or return. A highly ranked company can still lose business to competitors, technology, regulation or a geopolitical shock. It can also be overvalued or financially distressed. The network is only as complete as the reports read. It covers the S&P 500 and the listed suppliers they name most, so a private or foreign supplier appears only when a US filer names it. Market shares are rare in filings, so supply concentration is often missing. The ranking never estimates a share or a customer count that no document states.
In Kereon
Flow · Keystones. Recomputed whenever the network, the claims or the research store's financials change. The network is widened weekly from SEC EDGAR, and any company a member opens is read on demand. A company's own revenue or market value never raises its score. Revenue only weighs how much a dependent matters.
Also called: keystones, keystone, systemic importance, structural durability, durability score, supply concentration, replaceability, difficulty of replacement, single source, sole source, supply chain centrality.