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In this article, we will take a look at the 10 best freight stocks to buy now. To skip our analysis of the recent market trends and activity, you can go directly to 5 Best Freight Stocks to Buy Now.
The transportation industry creates value by moving goods and people and comprises multiple components such as airlines, railways, trucking, light vehicles, and maritime shipping, among others.
According to a report published by Deloitte, during the past two years, the transportation chain was severely impacted due to the pandemic. In addition to lockdowns and sickness, supply of goods was also disrupted. As a result, capacity on container vessels decreased and container rates skyrocketed. Similarly, airfreight demand also picked up. The disruption in global supply chain raised awareness for local sourcing to avoid disruptions. According to the report, there will be no major capacity-related issues in the upcoming 3 years as the capacity is increasing.
The railroad network, one of the most important components of the transportation industry in the United States, has been under scrutiny from railroad workers. In September, railroads and workers’ unions reached a tentative agreement to avert a national rail strike. On October 10, the third largest railroad union rejected its deal which has once again renewed the possibility of a nationwide strike.
The transportation industry and the freight stocks that are part of this industry have not fared well in the recent past. The Dow Jones Transportation Average index, a 20-stock, price weighted index that represents stock performance of large, well-known transportation industry stocks, was down year-to-date by nearly 23%, as of October 13, 2022.
Global markets have been going through a rough patch with fears of a recession due to inflation and aggressive monetary policies implemented by central banks. The Consumer Price Index increased 0.4% in September against the 0.3% estimate, while headline inflation was up by 8.2%, more than the 8.1% estimates. The higher-than-expected inflation figures have raised concerns about another 75-bps interest rate hike by the Fed in December.
Methodology
We took the 20 stocks that make up the Dow Jones Transportation Average index. These are some of the largest, well-known U.S. companies in the transportation industry. We sorted these stocks based on the number of hedge funds invested in them at the end of Q2 2022 and picked the top 10 freight stocks on the list. Hedge funds don't always get it right but their consensus stock picks outperformed the market by a large margin over the last 10 years (see the details here). Now, let's take a look at the best freight stocks to buy according to hedge funds:
10 Best Freight Stocks to Buy Now
10. Expeditors International of Washington Inc (NASDAQ:EXPD)
Number of Hedge Fund Holders: 28
Expeditors International of Washington Inc (NASDAQ:EXPD) is a global logistics company based in Seattle, Washington, with a worldwide network of over 350 locations across six continents. It offers air and ocean freight consolidation and forwarding, vendor consolidation, customs clearance, cargo insurance, distribution, and other value-added logistics services.
Expeditors International of Washington Inc (NASDAQ:EXPD) is expected to release its financial results for the third quarter of 2022 on November 8. Analysts hold consensus estimates of $4.22 billion for revenue and $1.95 for normalized EPS for the company.
Expeditors International of Washington Inc (NASDAQ:EXPD) operates as an asset light logistics provider that purchases cargo space from air freight and ocean cargo and resells it to customers, providing additional services along the way. This model has allowed the company to maintain a strong balance sheet with low debt, and strong cash position, as well as significant growth in the top and bottom line.
During the last 3 years, the revenue of Expeditors International of Washington Inc (NASDAQ:EXPD) exhibited an average growth of 29% while net income had an average growth of 39% during the same period. Despite the adverse market conditions, the company is expected to show resilience due to its asset-light model.
As of Q2 2022, 28 of the 895 hedge funds tracked by Insider Monkey held Expeditors International of Washington Inc (NASDAQ:EXPD) shares valued at a combined total of $349 million. First Eagle Investment Management was its largest hedge fund shareholder with ownership of 2.6 million shares valued at $253 million.
9. Old Dominion Freight Line (NASDAQ:ODFL)
Number of Hedge Fund Holders: 29
Thomasville, North Carolina-based Old Dominion Freight Line (NASDAQ:ODFL) is a leading less-than-truckload (LTL) motor carrier providing regional, inter-regional and national LTL services through a single integrated organization. The company operates through a network of more than 250 service centers throughout the United States.
On October 26, Old Dominion Freight Line (NASDAQ:ODFL) released its financial results for the third quarter of 2022. Its total revenue increased by 15% y-o-y to $1.6 billion, while its net income surged by 32% y-o-y to $377 million. It generated a normalized EPS of $3.36 for the quarter, beating the analyst consensus by $0.28. The company also declared a quarterly cash dividend of $0.30 per share.
Following the earnings release, Credit Suisse analyst Ariel Rosa raised the target price for Old Dominion Freight Line (NASDAQ:ODFL) shares to $292 from $285 and maintained a ‘Neutral’ rating for the shares. The analyst highlighted solid quarterly results for the company with margin expansion and yield growth.
As of Q2 2022, 29 of the 895 hedge funds tracked by Insider Monkey held Old Dominion Freight Line (NASDAQ:ODFL) shares valued at a combined total of $401 million. Cliff Asness’ AQR Capital Management was its largest hedge fund shareholder with ownership of 0.40 million shares valued at $100 million.
8. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)
Number of Hedge Fund Holders: 30
Lowell, Arkansas-based J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is a leading third-party logistics provider and one of the largest transportation logistics companies in North America. It offers intermodal, dedicated, refrigerated, truckload, less-than-truckload, flatbed, single source, and last mile, among other logistic services. Its company-owned fleet comprise nearly 111,000 intermodal containers, 20,000 tractors and 40,000 trailers.
On October 18, J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) released its financial results for the third quarter of 2022. Its total revenue increased by 22% y-o-y to $3.4 billion, while its net income increased by 35% y-o-y to $269 million. It generated a normalized EPS of $2.57 for the quarter, $0.11 more than the analyst consensus. The company also declared a quarterly cash dividend of $0.40 per share.
Following the earnings release, Benchmark analyst Christopher Kuhn lowered the target price for J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) shares to $195 from $215 but maintained a ‘Buy’ rating for the shares. The lower price target reflects the negative demand trend exhibited by some businesses recently.
As of Q2 2022, 30 of the 895 hedge funds tracked by Insider Monkey held J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) shares valued at a combined total of $1.1 billion. Henry Ellenbogen’s Durable Capital Partners was its largest hedge fund shareholder with ownership of 2.5 million shares valued at $399 million.
7. United Airlines Holdings, Inc. (NYSE:UAL)
Number of Hedge Fund Holders: 35
Chicago, Illinois-based United Airlines Holdings, Inc. (NYSE:UAL) is one of the largest airlines in the world that transports people and cargo throughout North America and destinations in Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. It provides freight and mail services to commercial businesses, freight forwarder and logistic firms as well as the United States Postal Service.
United Airlines Holdings, Inc. (NYSE:UAL) released its financial results for Q3 2022 on October 18. It reported operating revenues of $12.9 billion and a net income of $942 million. Its normalized EPS was recorded at $2.81 for the quarter, $0.53 more than the analyst consensus.
Following the earnings release, Citi analyst Stephen Trent raised the price target on United Airlines Holdings, Inc. (NYSE:UAL) shares to $65 from $56 while maintaining a ‘Buy’ rating on the shares. The target price raise follows solid top and bottom-line for Q3 and an optimistic guidance for the next quarter.
United Airlines Holdings, Inc. (NYSE:UAL) is subject to bullish sentiment from a large number of hedge funds as 35 of the 895 hedge funds held its shares as of Q2 2022, with the total hedge fund holdings valued at $648 million. Its largest hedge fund shareholder is Israel Englander’s Millennium Management.
6. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 38
Atlanta, Georgia-based United Parcel Service, Inc. (NYSE:UPS) is one of the world’s largest package delivery companies providing a broad range of integrated logistics solutions for customers in more than 220 countries and territories.
On October 25, United Parcel Service, Inc. (NYSE:UPS) released the financial results for third quarter of 2022. Its revenue increased by 4% y-o-y to $24.2 billion, while its net income increased by 11% y-o-y to $2.6 billion. The normalized EPS was recorded at $2.99 for the quarter, $0.14 more than the analyst consensus.
Following the earnings release, UBS analyst Thomas Wadewitz raised the price target on United Parcel Service, Inc. (NYSE:UPS) shares to $196 from $182 and maintained a ‘Buy’ rating for the shares. The analyst has raised the price target to reflect strong results for Q3 and an optimistic guidance for the next quarter which exceeds market expectations.
As of Q2 2022, 38 of the 895 hedge funds tracked by Insider Monkey held shares of United Parcel Service, Inc. (NYSE:UPS), worth $613 million. Ken Griffin’s Citadel Investment Group was its largest shareholder.
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Disclosure: None. 10 Best Freight Stocks to Buy Now is originally published on Insider Monkey.
