We recently compiled a list of the 11 Best Logistics Stocks to Invest in Right Now. In this article, we are going to take a look at where XPO, Inc. (NYSE:XPO) stands against the other logistics stocks.
The Logistics Industry: Current Dynamics
Logistics companies transporting goods around the world continue to navigate uncertainty as Donald Trump plans to impose 60% tariffs on goods from China and 25% tariffs on goods from Mexico and Canada. As reported by CNBC, Dave Bozeman, the new CEO of C.H. Robinson, sees an opportunity in Trump tariffs. The logistics giant is a top 3 carrier on the China-U.S. freight lane also carrying nearly 10% of the freight on the US-Mexico lane. Citi transportation analyst Ari Rosa considers the company’s business diversified enough to work through tariffs despite its global forwarding business being very exposed to China. The CEO’s stance on the tariffs was quite positive as well, as he stated:
“The freight still has to move. It might just move at a different starting point, and we would still be there to move that.”
In an interview with CNBC, Ravi Jakhar of the firm Allcargo Group, the world’s LCL consolidation leader and India’s largest integrated logistics solutions provider, reiterated optimism regarding the Trump tariff risks. He mentioned how over 4 years ago when sanctions came in from the Trump administration, the firm saw an increased import into its Vietnam offices from China and improved export out of Vietnam, alongside increased momentum in Indonesia and the Philippines. In his opinion, whether it is a short-term tariff sanction or a long-term structural trend, trade flows could change in terms of origins and destinations but the overall trade flows would remain robust as long as manufacturing and consumption are there.
As of what’s recent in the logistics landscape, the holiday season is in full swing, with holiday surcharges playing a crucial role in profitability for logistics companies since they charge their big retail customers extra fees on a per-package basis compared to their June volume during the busy holiday season. The increase in e-commerce is also benefitting such logistics providers and full truckload carriers. Simultaneously, an increase in freight in anticipation of future tariffs is also being seen.
A survey from Merchants Fleet and Atomik Research of decision-makers in organizations that typically transport freights of consumer-packaged goods throughout the US revealed that 88% saw AI as useful in alleviating pressures on their fleets this peak delivery season. AI’s data-driven capabilities are to streamline operations and decision-making, with the majority of the respondents citing supply chain optimization as a primary benefit. Other advantages mentioned were improved route optimization, enhanced inventory management, and reduced downtime by identifying maintenance issues with fleet vehicles.
Our Methodology:
In order to compile a list of the 11 best logistics stocks to invest in right now, we went through stock screeners, ETFs, and media reports to make a list of relevant stocks. Moving on, we shortlisted the top 11 stocks from our list which had the highest number of hedge fund holders. The 11 best logistics stocks to invest in right now have been arranged in ascending order of their hedge fund holders as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A convoy of freight trucks on a highway, reflecting industrial freight transportation.
XPO, Inc. (NYSE:XPO)
Number of Hedge Funds: 48
XPO, Inc. (NYSE:XPO) serves as a leader in asset-based less-than-truckload (LTL) freight transportation in North America. The firm caters to approximately 54,000 customers with 611 locations and 38,000 employees in North America and Europe, with headquarters in Greenwich, Connecticut.
XPO has been in the LTL business for over three decades, with 18 billion pounds of freight moved per year, enabled by its proprietary technology. The firm benefits from an extensive network offering coast-to-coast coverage as it covers 99% of all US zip codes. The network doesn’t end here as the firm offers efficient cross-border and offshore service to Canada, Mexico, Alaska, Hawaii, and Puerto Rico. The firm manages volume for customers of every size with 9,600 tractors, 34,000 trailers, and more than 13,000 professional drivers.
The North American LTL industry offers a compelling environment to XPO, Inc. (NYSE:XPO). Favorable industry dynamics include a $52 billion bedrock industry for the US economy with almost 75% share held by top 10 LTL players, diverse demand across verticals, and an attractive pricing environment for over a decade, with a positive year-over-year industry pricing each year.
While a soft freight environment was experienced in the third quarter, XPO, Inc. (NYSE:XPO) successfully boosted its adjusted EBITDA by 20% and adjusted diluted EPS by 16%, companywide. Due to higher yield in the North American LTL segment and volume growth in the European Transportation segment, revenue increased year-over-year. Regarding the future, the chief executive officer of XPO, Mario Harik, remains confident in the positioning of the business to accelerate earnings growth on the freight market recovery.
Overall XPO ranks 4th on our list of the best logistics stocks to invest in right now. While we acknowledge the potential of XPO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than XPO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.