Daily Archives: February 12, 2018

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Wondering Why Your Package is Late? Stocks to Buy for Trucking Boom

While the advancement of electric trucks is the headline grabber, the real news in the sector is that the U.S. trucking industry is enjoying a period of prosperity it hasn’t seen in years. Let me explain…

As I have written about many times, the U.S. economy has joined with nearly every other economy around the globe in a period of synchronized economic growth that the world has not seen in over a decade.

That is great news for a number of sectors and for us as investors. It makes even a supposedly boring industry like trucking filled with excitement over the growth opportunities.

U.S. Trucking Boom

We just experienced a robust Christmas season for retailers. In fact, it was the best since 2011. When you add in that manufacturers are also shipping more cargo – industrial production recently experienced the largest year-over-year gain since 2010 – it makes it a great time to be in the trucking industry.

We saw the ratio of loads in need of movement to trucks available in December hit the highest level on record. Then, in early January, just one truck was available for every 12 loads needing to be delivered according to online freight marketplace DAT Solutions LLC. That was the most unbalanced marketplace since the aftermath of Hurricane Katrina in October 2005. Moving into late January, that number only dropped to one truck for every 10 loads.

Related: Top 3 Electric Vehicle Stocks to Buy Instead of Tesla

This is significant since January is typically a quiet month for the industry. Yet this year, the national average spot truckload rates have been higher than during the peak season in 2007.


That has led to rising costs to get something shipped. The spot rate to hire a 53-foot tractor trailer has risen by 24% over the past year to over $2 per mile. Of course, many companies are being forced to pay a lot more than that if they want to jump to the front of the line and definitely have their goods delivered on time.Not surprising then that the consultancy FTR said the rate of active truck utilization stood at 100%, versus a 10-year average of 93%. In other words, there was no excess capacity in the system.

The situation is likely to get worse in April when produce shipments pick up. And this year we have a special factor – the full enforcement by the federal government of the ELD rules kicks in. An ELD is an electronic logging device in truck cabs that will monitor whether truck drivers are getting the amount of rest required by law. Truckers will be limited to driving only 11 hours per day. Trucks without the devices may be removed from the road.

All of these factors add up to great news for the stocks of companies involved in trucking and logistics. One such company is XPO Logistics (NYSE: XPO), which I will discuss in a moment. But there is also another obvious beneficiary of this boom.

Truck Manufacturers Also Booming

That beneficiary happens to be the companies that manufacture heavy-duty trucks. December saw the most Class 8 trucks (that most commonly used on long-hauls) ordered in three years. According to ACT Research, there were 37,500 such vehicles ordered, a rise of 76% from a year earlier.

And January was even a better month for the truck manufacturers! There were 48,700 heavy-duty trucks ordered. That is double the year-ago level and is the most big rigs ordered in 12 years.

The top truck manufacturing companies include: Daimler AG (OTC: DDAIY), Navistar International (NYSE: NAV), and a company that I’ve spoken about before with regard to electric trucks, Volvo AB (OTC: VOLVY), which is the world’s second-largest truck manufacturer.

On January 31, Volvo raised its forecast for the U.S. truck market saying that it expected deliveries to rise 7%. It said this would bring the company much closer to its goal of lifting operating profit consistently above 10% of revenue.

As I said, Volvo is a leader in the electric truck segment too. It is testing a hybrid powertrain for long-haul heavy-duty trucks that is all part of its Super Truck project working in conjunction with the U.S. Department of Energy. Here are some of its features:

  • It recovers energy when driving downhill on slopes steeper than 1%, or when braking. The recovered energy is stored in the vehicle’s batteries and used to power the truck in electric mode on flat roads or low gradients.
  • It also has an enhanced version of Volvo Trucks’ driver support system I-See, which has been developed specially for the hybrid powertrain, which analyzes the upcoming topography using information from GPS and the electronic map.

For long hauls, it is estimated that the hybrid powertrain will allow the combustion engine to be shut off for up to 30% of driving time.

Two U.S. Trucking Opportunities

Two U.S.-based firms that I like as beneficiaries of this ongoing trucking boom (which I can expect to last into 2019) are the aforementioned XPO Logistics and Navistar International. Here are some details on these two companies for you…

XPO Logistics is a top ten global logistics firm with operations in both logistics and transportation in 32 countries. Customers trust XPO with an average of 160,000 shipments and over seven billion inventory units every day.

It currently generates about $15 billion in annual revenue, with about 60% of that coming from the U.S. The breakdown between its two segments shows that roughly 63% of revenue comes from transportation (trucking and brokerage), with the remaining 37% from logistics. The logistics segment includes e-commerce fulfillment and warehousing operations.

XPO actually owns 16,000 tractors; 39,000 trailers; 10,000 53-feet intermodal boxes, and 5,200 chassis.11,000 trucks are contracted via independent operators and it brokers more than one million trucks. XPO also owns 440 cross-docks and 767 contract logistics facilities.

It is also an innovator in the industry with the use of advanced robotics and automation and leading -edge software and cloud-based platform. These innovations helped XPO to be named the top-performing U.S. company by Forbes on its 2017 Global 2000 list.

Navistar International manufactures International brand commercial and military trucks, school and commercial buses as well as diesel engines. Trucks make up most of its revenues, generating 67.8% of the total in 2017. The company has issued positive guidance for 2018 saying it expects revenues to be in the range of $9 to $9.5 billion versus $8.6 billion in fiscal 2017.

The company should benefit from the launch of new products. In order to strengthen the Class 8 lineup, the company introduced a new 12.4 liter engine – A26 – in February 2017. This new lighter-weight engine will provide a competitive entry to the company in the 13 liter segment, which constitutes about 50% of the Class 8 market. Navistar also started delivering new International brand vehicles with A26 engines. On the electric truck front, by 2019, Navistar plans to unveil an electric medium-duty truck in conjunction with Volkswagen.

A year ago (February 2017), Navistar unveiled a strategic alliance with Volkswagen’s truck division. Volkswagen purchased a 16.6% stake in Navistar for $256 million. This alliance should definitely broaden the company’s technology options and widen its range of products and services.

The lesson here is that you don’t have to limit your investments, if you’re looking for growth, to just sectors like technology or healthcare. Sometimes you can find growth opportunities in places you’d least expect.

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Source: Investors Alley

ETF

It’s Time to Go Long on This ETF While the Rest of the Market Panics

Let’s talk about big, long-term trends.

You know, those relentless economic and technological movements that promise to endure, no matter what’s happening in the stock market.

I’m talking about things that we can’t live without – like water or electricity – as well as fast-developing socio-economic trends like the shift towards greater use of robotics and automation.

I bring this up today because – as was inevitable – the markets are experiencing a sudden bout of serious volatility.

Following a whipping at the end of last week, the major indexes suffered a bloodbath to kick off this week, with the Dow shedding 1,175 points on Monday. It was the index’s biggest one-day points loss in history and the strong start to 2018 has been wiped out in the blink of an eye.

If you’re prone to panic… don’t.

Such volatility is something I’ve forewarned about a few times in recent articles – and I’ve given you a variety of investments to consider that are well-positioned to weather such storms.

But I’ve also highlighted companies that aren’t just defensive. They’re ones that should rise over the long term regardless – and are capitalizing on the robotics trend that I mentioned above.

These Two ‘Bots Are Rising

Specifically, I’m referring to ABB Ltd. (NYSE: ABB), which I profiled on November 30, and Brooks Automation(Nasdaq: BRKS), which I wrote about on December 14. Both stocks are up since I wrote about them.

As I noted in my original ABB piece, almost one-third of the firm’s annual sales come from its robotics business. And Frost & Sullivan recently recognized its prowess in this area with the 2017 Global Company of the Year Award for innovation in automation systems. The award was based on ABB’s industry-leading work in the Distributed Control Systems (DCS) industry. ABB connects 70 million smart devices via 70,000 automated control systems.

With Brooks, the company reported strong fiscal first-quarter earnings last week, with revenue totaling $189.3 million – up 18% over Q1 2017. Non-GAAP net income also rose by 35% over Q1 2017 to $35 million. That resulted in $0.32 EPS – up 25% and beating estimates by a penny.

For the current quarter, revenue is projected to hit $195 million to 205 million, with EPS between $0.33 and $0.41.

On a wider industry scale, the verdict is clear: The robotics and automation trend is growing. Fast.

  • The International Data Corp (IDC) projects robotics spending to surge to $230.7 billion in the five-year period to 2021 – with a CAGR of 22.8%.
  • The International Federation of Robots (IFR) says 1.3 million industrial robots will enter the global factory “workforce” this year. The figure will rise to 1.7 million by 2020.
  • The IFR projects even bigger growth for the service robot industry, with 32 million units in operation between this year and 2020. That will bring the market value to $11.7 billion.

As John Santagate, research manager at IDC Manufacturing Insights’ Supply Chain, says, “We continue to see strong demand for robotics across a wide range of industries.”

And as technology and innovation improves, the reach is spreading beyond just industrial and manufacturing, too. Dr. Jing Bing Zhang, research director at IDC Manufacturing Insights’ Robotics division, says. “The convergence of robotics, artificial intelligence, and machine learning are driving the development of the next generation of intelligent robots for industrial, commercial, and consumer applications. Robots with innovative capabilities such as ease of use, self-diagnosis, zero downtime, learning and adaptation, and cognitive interaction are emerging and driving wider adoption of robotics and enabling new uses in healthcare, insurance, education, and retail.”

He’s right. Growth here will continue for years to come – and I’m still positive on ABB and Brooks.

The past week’s market downturn also gives you a great chance to buy another investment on the cheap.

Go Robo

With volatility currently cranking higher, if you’re looking for a more diversified way to play this trend, take a look at the ROBO Global Robotics and Automation ETF (Nasdaq: ROBO).

Launched in October 2013, the actively managed fund (which includes both investment managers and industry experts) was the first to track global robotics, automation, and AI. It holds 89 stocks – including stalwarts like iRobot (Nasdaq: IRBT)and Rockwell Automation (NYSE: ROK) – with the $2.4 billion in assets divided equally among them.

In a testament to the strength of the industry, ROBO is coming off a stellar 2017, in which it gained 40%. It’s up 68% since inception.

With “lots of people looking at what’s going to happen over the next 5, 10, 20 years,” according to Global X Funds director of research Jay Jacobs, the robotics and automation trend is most definitely one place they’re looking. And as the industries continue to expand, heavily diversified funds like ROBO are right in the sweet spot of the growth.

Not only that, the market’s current downturn means you can buy shares for around 8.5% cheaper than a couple of weeks ago.

Buffett just went all-in on THIS new asset. Will you?
Buffett could see this new asset run 2,524% in 2018. And he's not the only one... Mark Cuban says "it's the most exciting thing I've ever seen." Mark Zuckerberg threw down $19 billion to get a piece... Bill Gates wagered $26 billion trying to control it...
What is it?
It's not gold, crypto or any mainstream investment. But these mega-billionaires have bet the farm it's about to be the most valuable asset on Earth. Wall Street and the financial media have no clue what's about to happen...And if you act fast, you could earn as much as 2,524% before the year is up.
Click here to find out what it is.

Source: Investors Alley