Note to America: Keep on truckin’
Today's Financial News - Posted March 25, 2009
While there are plenty of doubts surrounding the nation’s economy, the industry’s that were left alone to succeed or fail are on the rebound. The trucking industry is showing plenty of profit potential.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): No matter how much we fight against it, the natural forces of the economy will always prevail. For proof, look at the nation’s trucking industry.
As the world’s economy soared at an unsustainable pace, truckers were racing from one corner of the continent to the other carrying cars, corn, buildings supplies, TVs, bandages, you name it. The more Americans spent, the more the industry had to move.
New trucking fleets were hitting the streets almost daily. And the call for more road jockeys was everywhere.
But now, the environment has changed dramatically. Last year, as freight demand dropped by double-digit proportions, over 3,000 trucking fleets put their operations in park. Suddenly, an industry with a shortage of 20,000 drivers found it had more resumes than jobs.
It sounds like a dire picture, but it is exactly the prescription Mother Economy has written to get the industry back in the fast lane and in high gear. With fewer competitors, the surviving truckers can better price their loads. And with a glut of drivers, management teams have more power than ever over their drivers.
It is no wonder the Teamsters have recently made some large concessions. Its drivers have no choice.
No longer stuck in reverse
Fortunately, it appears the sector has hit rock bottom. The weaklings have been pushed out of the herd and a new, leaner industry is on the rise. Today’s surprise jump in durable goods orders and the positive news out of the housing industry earlier in the week helps prove Americans are shipping more than they were just a few months ago.
For companies like YRC Worldwide (NASDAQ:YRCW) and Con-Way (NYSE:CNW), the news comes with a sigh of relief. Of course, there will be some large potholes and expensive tolls to pay on the road back to the top, but at least these companies have survived.
If YRC Worldwide stands out in your head, it probably means you followed my recent Beta trades. I recommended a covered call position that has paid off quite handsomely. We are still holding onto the play, currently sitting on gains of 60%.
If you are looking for similar profits, turn to Con-Way. It has broad exposure in the growing less-than-truckload sector, plus strong multimodal business. As the nation gets back on its feet, the company’s phones will be busy.
The government may be doing its best to reshape the economy to its liking, but the industries that were able to successfully rid themselves of the fat and quickly restructure will be the leaders as America’s GDP starts to grow once again.
If you follow the buy-what-you-use investing approach, the trucking industry is a no-brainer. Just about everything we buy has been in the back of a truck several times in its life. You might as well own a piece of the action.
Next Article: Blockbuster makes a move. Should Netflix be scared?
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March 27th, 2009 at 11:56 pm
I would be catious betting on yrc for the long run they have a long way to go. might want to take your profits and bet it on anouther horse, Conway ups and fedex are down and they will survive.