11 Best Transportation Stocks To Buy Heading Into 2024
In this article, we discuss 11 best transportation stocks to buy for 2024. If you want to skip our discussion on the transportation industry, head directly to 5 Best Transportation Stocks To Buy Heading Into 2024.
In August 2023, there was a 28.4% increase in total air traffic, as measured by revenue passenger kilometers (RPKs), when compared to August 2022, per a report by International Air Transport Association (IATA). Globally, traffic has now reached 95.7% of the levels seen before the COVID-19 pandemic. International traffic experienced a 30.4% growth compared to August last year, with all markets showing double-digit percentage increases year-over-year. The demand for air travel was robust in August, and ticket sales data indicates that international bookings are strengthening for travel in the latter part of the year. Willie Walsh, IATA’s Director General, commented:
“Heading into the last quarter of the year, the airline industry is nearly fully recovered to 2019 levels of demand. The focus, however, has not been on getting back to a specific number of passengers or flights, but rather on meeting the demand by businesses and individuals for connectivity that was artificially suppressed for more than two years. Having seen the economic, social, and personal losses when airlines could not fly during the COVID-19 crisis, this industry is determined to secure a sustainable long-term future by achieving net zero carbon emissions by 2050. That was clearly evident at the first IATA World Sustainability Symposium (WSS) where discussions focused on how to decarbonize. We know that our customers want a world in which they can enjoy the freedom to travel sustainably. This inaugural WSS was a critical step in aligning policy makers, the aviation value chain and airlines with the concrete steps needed to deliver. And we will measure progress when we meet again in a year’s time.”
On the other hand, shipping is a crucial segment of the transportation sector and it is grappling with multiple challenges. Maersk, a prominent player in global shipping, announced on November 3 that it will cut its workforce by more than 10,000 employees, in addition to projecting lower profits due to overcapacity leading to price declines. Despite this, Maersk maintained its full-year EBITDA guidance of $9.5 billion to $11 billion, but the company anticipates it will be at the lower end of this range. In the third quarter of 2023, Maersk’s revenue came in at $12.1 billion, a steep decline from $22.8 billion in the prior-year quarter. Maersk expects these job cuts to yield an additional $600 million in savings in 2024 when compared to 2023. Moreover, a recent analysis has revealed that the global shipping sector is not making sufficient progress to achieve the target of having zero-emission fuels represent 5% of global shipping fuel by 2030. This lack of progress puts the shipping industry's 2050 decarbonization goal at risk.
On a positive note, electrification in public transport will make the sector greener. For example, India announced a $7 billion investment t0 promote environmentally friendly public transportation in mid-August, with the goal of reducing vehicle emissions and addressing the growing transportation needs in its urban areas. The plan involves the deployment of 10,000 electric buses in cities, as confirmed by Anurag Thakur, the Indian Information and Broadcasting Minister. The federal government will contribute 200 billion Indian rupees to this initiative, with active participation from private companies. Cities with populations ranging from 300,000 to 4 million residents will be eligible to compete for this funding.
Some of the best transportation stocks to buy for 2024 in order to benefit from the growth potential in the sector include The Boeing Company (NYSE:BA), Union Pacific Corporation (NYSE:UNP), and Uber Technologies, Inc. (NYSE:UBER).
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Our Methodology
We selected the following transportation stocks based on the hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the second quarter of 2023. The list is arranged in ascending order of the number of hedge fund investors in each firm.
Best Transportation Stocks To Buy Heading into 2024
11. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 31
Southwest Airlines Co. (NYSE:LUV) is a passenger airline company offering scheduled air transportation services within the United States and in nearby international regions. Southwest Airlines Co. (NYSE:LUV)’s operating revenue for the third quarter of 2023 came in at $6.5 billion, indicating a 4.9% increase year-over-year. However, the revenue fell market estimates by $40 million. The Q3 non-GAAP EPS of $0.38 also fell short of Street consensus by $0.01.
According to Insider Monkey’s second quarter database, 31 hedge funds were long Southwest Airlines Co. (NYSE:LUV), compared to 37 funds in the prior quarter. Richard Oldfield’s Oldfield Partners is the biggest stakeholder of the company, with 2.75 million shares worth approximately $100 million.
In addition to The Boeing Company (NYSE:BA), Union Pacific Corporation (NYSE:UNP), and Uber Technologies, Inc. (NYSE:UBER), Southwest Airlines Co. (NYSE:LUV) is one of the best transportation stocks to buy.
Here is what ClearBridge Investments has to say about Southwest Airlines Co. (NYSE:LUV) in its Q1 2021 investor letter:
“One of our goals as we constantly monitor the portfolio is to see if we can better deploy capital by lowering the probability of being wrong. This motivation drove our swap of Delta Airlines into Southwest Airlines during the quarter. We expect a huge rebound in airline traffic as COVID-19 concerns abate, but we are much more comfortable that it will be led by leisure travel. Conversely, we are more uncertain of the ultimate level and timing of business travel demand. Southwest, with its simple fare strategy and high leisure travel exposure, is better positioned to capture the ongoing traffic rebound without having to answer the business travel demand question on which Delta is more dependent. As a result, we expect Southwest to play serious offense as it gains share in the rebounding travel market and can fully leverage the massive pent-up demand for travel that we expect. In addition, the U.S. lead in vaccination over Europe favors Southwest over Delta, given the domestic focus of Southwest. COVID-19 has changed many things, but humans by their very nature like to move, and many of them will do it on Southwest.”
10. Knight-Swift Transportation Holdings Inc. (NYSE:KNX)
Number of Hedge Fund Holders: 35
Knight-Swift Transportation Holdings Inc. (NYSE:KNX) delivers freight transportation services in the United States and Mexico. The company is divided into four segments – Truckload, Less-than-truckload (LTL), Logistics, and Intermodal. It is one of the best transportation stocks to buy. On October 19, Knight-Swift Transportation Holdings Inc. (NYSE:KNX) reported a Q3 non-GAAP EPS of $0.41 and a revenue of $2.02 billion, outperforming Wall Street estimates by $0.05 and $90 million, respectively.
According to Insider Monkey’s second quarter database, 35 hedge funds were bullish on Knight-Swift Transportation Holdings Inc. (NYSE:KNX), compared to 32 funds in the prior quarter. Ben Jacobs’ Anomaly Capital Management is the largest stakeholder of the company, with 2.5 million shares worth over $139 million.
TimesSquare Capital U.S. Mid Cap Growth Strategy made the following comment about Knight-Swift Transportation Holdings Inc. (NYSE:KNX) in its Q2 2023 investor letter:
“Results were less than anticipated for the truckload freight transportation provider, Knight-Swift Transportation Holdings Inc. (NYSE:KNX) which led its shares down by -2%. Management notably reduced its guidance for the current fiscal year, which we had been expecting when we initiated this position in late January. Our view is that truckload activities were nearing a trough and this industry tends to recover quickly from such bottoms.”
9. XPO, Inc. (NYSE:XPO)
Number of Hedge Fund Holders: 35
XPO, Inc. (NYSE:XPO) provides freight transportation services in the United States, North America, the United Kingdom, and Europe. The company’s operations are divided into two segments – North American LTL and European Transportation. XPO, Inc. (NYSE:XPO) announced Q3 non-GAAP earnings per share of $0.88 and a revenue of $1.98 billion, outperforming Wall Street estimates by $0.24 and $50 million, respectively. In the third quarter, the company generated $236 million in operating cash flow and finished the quarter with $355 million in cash and cash equivalents. XPO, Inc. (NYSE:XPO) is one of the best transportation stocks to monitor.
According to Insider Monkey’s second quarter database, XPO, Inc. (NYSE:XPO) was part of 35 hedge fund portfolios, compared to 30 in the prior quarter. Farhad Nanji and Michael Demichele’s MFN Partners is the largest stakeholder of the company, with 12.6 million shares valued at $747.8 million.
ClearBridge SMID Cap Growth Strategy made the following comment about XPO, Inc. (NYSE:XPO) in its Q2 2023 investor letter:
“Our holdings in the industrials sector positively contributed to relative performance. Corporate earnings for the industrials sector have continued to exceed market expectations thanks in part to the diversity of industries and end markets for their products. Specifically, the portfolio benefited from its investments in XPO, Inc. (NYSE:XPO), our top individual performer, and Vertiv. XPO, which provides freight transportation services globally, saw its share price increase after the company announced it had hired an experienced industry veteran as its new president who is expected to implement new initiatives to help drive further margin expansion.”
8. American Airlines Group Inc. (NASDAQ:AAL)
Number of Hedge Fund Holders: 35
American Airlines Group Inc. (NASDAQ:AAL) operates as a network air carrier, offering passenger and cargo air transportation services through different hubs and partner gateways worldwide. American Airlines Group Inc. (NASDAQ:AAL) is one of the top transportation stocks to monitor. On October 19, the company reported a Q3 non-GAAP EPS of $0.38, beating market estimates by $0.12. However, the revenue of $13.48 billion fell short of Wall Street forecasts by $60 million.
According to Insider Monkey’s second quarter database, 35 hedge funds held stakes in American Airlines Group Inc. (NASDAQ:AAL), compared to 36 funds in the prior quarter. D E Shaw is a prominent stakeholder of the company, with 12.2 million shares worth $219.6 million.
7. United Airlines Holdings, Inc. (NASDAQ:UAL)
Number of Hedge Fund Holders: 40
United Airlines Holdings, Inc. (NASDAQ:UAL) offers air transportation services globally, carrying passengers and cargo through its fleets. United Airlines Holdings, Inc. (NASDAQ:UAL) is one of the best transportation stocks to invest in. On October 17, the company reported a Q3 non-GAAP EPS of $3.65 and a revenue of $14.48 billion, outperforming Wall Street estimates by $0.24 and $70 million, respectively. Capacity also increased 15.7% compared to the prior-year quarter.
According to Insider Monkey’s second quarter database, 40 hedge funds were bullish on United Airlines Holdings, Inc. (NASDAQ:UAL), same as the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with approximately 5 million shares worth $272.4 million.
6. Canadian Pacific Kansas City Limited (NYSE:CP)
Number of Hedge Fund Holders: 52
Canadian Pacific Kansas City Limited (NYSE:CP) operates a transcontinental freight railway in Canada and the United States, transporting bulk commodities and merchandise freight, as well as intermodal traffic, including retail goods in overseas containers. On October 25, Canadian Pacific Kansas City Limited (NYSE:CP) reported a Q3 non-GAAP EPS of C$0.92 and a revenue of C$3.34 billion, exceeding market forecasts by C$0.26 and C$900 million, respectively.
According to Insider Monkey’s second quarter database, 52 hedge funds were bullish on Canadian Pacific Kansas City Limited (NYSE:CP), compared to 48 funds in the preceding quarter. Like The Boeing Company (NYSE:BA), Union Pacific Corporation (NYSE:UNP), and Uber Technologies, Inc. (NYSE:UBER), Canadian Pacific Kansas City Limited (NYSE:CP) is one of the top transportation stocks preferred by hedge funds.
Pershing Square Holdings made the following comment about Canadian Pacific Kansas City Limited (NYSE:CP) in its first half 2023 investor letter:
Canadian Pacific Kansas City Limited (NYSE:CP) is a high-quality business with significant earnings growth potential that operates in an oligopolistic industry with considerable barriers to entry and significant pricing power due to its high quality competitive transportation offering. After receiving regulatory approval from the Surface Transportation Board on March 15, Canadian Pacific closed the acquisition of Kansas City Southern on April 14th and renamed the combined company Canadian Pacific Kansas City.
CPKC is a high-quality business with significant earnings growth potential that operates in an oligopolistic industry with considerable barriers to entry and significant pricing power due to its high quality competitive transportation offering. After receiving regulatory approval from the Surface Transportation Board on March 15, Canadian Pacific closed the acquisition of Kansas City Southern on April 14th and renamed the combined company Canadian Pacific Kansas City. …” (Click here to read the full text)
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Disclosure: None. 11 Best Transportation Stocks To Buy Heading Into 2024 is originally published on Insider Monkey.
