The transports are a core group of stocks that are a good barometer of the economy, and thus, of the stock market.
Even Charles Dow — the founder of the Dow Jones Industrial (and Transports) Average, founder of the Wall Street Journal and inspiration for Dow Theory — saw how important their relationship to the market was.
The simple concept is this: When goods are in demand, transports rise because they are delivering more goods from suppliers and manufacturers down to the marketplace.
When industry needs goods to produce more stuff, transports are busy shipping the stuff to industry and then delivering it to consumers. When that relationship is off — industrial demand slacks off, or shipping demand on one or more legs drops off — there’s a disconnect and some part of the economy is in trouble.
But we’re currently in a place where global logistics companies, shippers, you name it, are finally getting back in action. And some have been beaten down while the trade war has dragged on. As the senior analyst of one of the world’s leading financial think tanks, I actively seek out beaten-down stocks with potential. The most important component of any new or troubled business is to find strong fundamental drivers. Looking at catalysts has helped me identify opportunities such as Apple (NASDAQ:AAPL) when it traded for 56 cents. If you employ this strategy, it will change your life for the better.
To get you started, I’ve looked at six transportation stocks, all of which are A-rated Portfolio Grader stocks ready for the good times ahead.
Transportation Stocks: Saia (SAIA)
Saia (NASDAQ:SAIA) is a trucking company that started in Cajun country Louisiana in 1924. It specialized in trucking between Texas and Louisiana until 1980, when it expanded operations.
Now the company offers a variety of logistics and trucking services around North America.
The stock has been on the move since mid-year, and is currently up 65% for the full year. Much of this sector has been hot this year because there has been a shake-up at the top of the sector as Amazon (NASDAQ:AMZN) has been reorganizing its logistics arrangements with FedEx (NYSE:FDX) and others. This has given companies like SAIA more opportunities to grab business.
Plus, a good economy in Texas energy markets and the end of the trade war with China will also help, since SAIA works two major ports – New Orleans and Houston.
And even with its big gains, the stock is still trading at a trailing price-to-earnings ratio of 21, which means there’s still time to get in.
Werner Enterprises (WERN)
Werner Enterprises (NASDAQ:WERN) is one of those trucking companies that if you travel interstates much, you have likely seen their trucks. They’ve been in business since 1956 and specialize in medium- and long-haul trucking as well as logistics services for truck brokerages.
They also specialize in deliveries of non-durable products — cosmetics, foods, fuel, etc — by the truckload.
It’s more important than ever to invest your money in stocks that can weather a potential storm. What you need to bear in mind here is that WERN doesn’t really live in the same world as consumer-facing companies like FDX, which aren’t doing well. They are moving products from wholesalers to retailers, or factories to wholesalers or distribution centers. That’s a different business.
And that’s why WERN has managed to deliver a solid return this year and still remain a bargain. This year should be a good one, but WERN is a solid company that keeps on rolling year after year.
Grupo Aeroportuario del Pacifico SAB (PAC)
Grupo Aeroportuario del Pacifico SAB (NYSE:PAC) is a Mexico-based companies that operates airports in large Mexican cities as well as airports in Jamaica.
This is not only about rising tourism traffic as economies expand, but also increased business traffic in the import/export markets as well as ramping manufacturing facilities, now that the USMCA has passed the president has signed it.
The market hates uncertainty, and this this part of the market was feeling the pressure of a global slowdown and tensions between Mexico and the U.S., as well as the broader trade agreements.
Now, one of the big pieces of uncertainty has lifted. And growth looks solid moving forward, on both sides of the border.
Plus, PAC is a small mid-cap company with a $6.8 billion market cap, so that means growth is more leveraged than it is with a larger firm. The stock is up 48% this year and is still delivering an inflation-beating 3.2% dividend.
XPO Logistics (XPO)
XPO Logistics (NYSE:XPO) has had quite a ride — in both directions — thanks to its business with Amazon.
From January 2017 to fall 2018, the stock was up 160%. That’s pretty impressive for a $7 billion market cap trucking and logistics company. But that was because it landed a massive client that was using its last mile warehousing and logistics for its expanding e-commerce platform.
But then that partner cut its business by two-thirds. Now XPO was expanding its operations and beefing up capabilities to keep AMZN business and grow it. When the cut came, like AMZN’s recent break with FDX, it was a heavy blow.
By January 2019, the price of the stock was cut in more than half from its recent highs.
But it’s now coming back. The stock is up 42% in 2019, and its trailing P/E is around 25. That kind of resiliency will serve it well in this dynamic market. While the bull market is from from over, there are bumps ahead. To prepare for a potential storm, investors should buy stocks — like XPO — that have shown resiliency.
Kansas City Southern (KSU)
Kansas City Southern (NYSE:KSU) is a freight rail company that has operated in 10 central and southeastern states — Illinois, Missouri, Kansas, Oklahoma, Arkansas, Tennessee, Alabama, Mississippi, Louisiana and Texas.
This service area comprises most of the American heartland, and there’s lots of products that are now moving a bit better with the phase one trade agreement almost signed.
This should be a big boost in business, whether in agriculture products or energy. More economic growth requires more energy, and that has to be shipped.
This is a $16 billion market cap company and it’s up 61% in the past year. That’s more like a tech firm than a rail company that has been operating since 1887.
Canadian Pacific Railway (CP)
Canadian Pacific Railway (NYSE: CP) has been around since 1881, and operates from its headquarters in Calagary, western Canada.
The Western provinces are the most economically productive in the country, and the Pacific Coast is an especially important hub for trade with Asia.
There was a large influx of Chinese into the country over the past decade and that has furthered cemented trade relations between the two countries.
CP is an intermodal carrier, which means it picks up containers and trailers at ports and then transfers them to rail cars for delivery to distribution points across its territory.
It also runs a lot of the energy products that are produced in Calgary and other western regions. Both these businesses should be picking up as the global economy starts to improve.
This is a major player in the Canadian economy and has a $35 billion market cap. The stock is up 45% this year and next year is looking promising.
The most fundamental shift happening right now, however, is in advanced technologies such as autonomous vehicles. But it’s not the car companies themselves you should be buying … but the companies that make this future a possibility. I’m taking about the “master key” companies. These are the firms that make “the brain” which powers self-driving cars. There are also “master key” companies in advanced medical diagnosis and the Internet of Things (IoT). To see how you can get in on the ground floor of these amazing breakthroughs, read my special report here.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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