In the previous blog, we took a look back at how the major Canadian and American transportation stocks performed in 2007. In this blog, we will look ahead to 2008. Quoting from this week’s RBC Dominion Securities report, “Market psychology had been shifting from concern in June/July, to fear in November/December before moving to panic as reflected by the climactic sell-off early last week. Some historically reliable indicators suggest that it is not unreasonable to now expect a better tone to market prices for the next while….The S&P 500’s 17% drop from top to bottom suggests that a garden variety recession has been priced in. Typically, this has been followed by a 20-25% rally over the ensuing 12 months.”

The report then goes on to say that “those looking for a catalyst should note that extreme pessimism has been met with forceful policy action over the past two weeks. We’re witness to an unprecedented pace of Fed easing in such short order …., a fiscal package worth just north of 1% of GDP, and the announcement of various financial/mortgage sector bailouts and rescue attempts. Consistently catching the ultimate turn in the market is near impossible, but a set of market conditions have fallen into place that have in the past increased the odds of a rally”.

These optimistic words beg the question, which stocks should you pick. In the previous blog, I suggested that one very useful source of financial information on transportation stocks is the Yahoo Finance website. Let’s take a look at the data that is available.

First go to the Industry segment of the Yahoo Finance website and click on Trucking. As you can see, you can access Railroads, Air Delivery and Shipping services from this web page. By clicking on the “Industry” page, you can see many of the major trucking stocks listed. Here you can see various key indicators such as their price/earnings ratios, their debt to equity ratios and other variables. They are presented in such a way that it is easy to compare all of the trucking companies listed. You can then click on any company of interest to you. When you do so, you can then see a summary of the company’s operations and you are able to compare various companies in each sector.

For example, if you are interested in the LTL sector, you can click on Arkansas Best Corp. This will show you their financials and allow you to click on YRC, for example, one of their direct competitors. Here is where you can have some fun. If you go the Analyst coverage section, you can see how the analysts who follow transportation stocks are forecasting the results (Analyst Opinion) for ABF and its competitors, over the next few quarters. You can also obtain the analysts’ ratings of each stock (Star Analyst) and match them against how successful they have been in their financial projections. The site also contains financial information and provides you with insider transactions so you can see if the executives of the company are buying or selling their own company’s stock.

There are certain analysts who have been following the U.S. transportation stocks for some time. Some of the most frequently quoted sources are:

Edward Wolfe of Bear Stearns
Thomas Albrecht of Stephens Inc.
John Larkin of Stifel Nicolaus & Company, Inc.
Justin Yagerman of Wachovia Capital Markets
Jason Seidl of Credit Suisse
Jon Lagerfeld of Robert Baird
John Barnes of BB & T Capital Markets
Thomas Wadewitz of J.P. Morgan

The projections from many of these analysts, for a large number of transportation stocks, can be found in this very useful website. This leads to the next question, what are the experts picking to outperform the market in 2008. If you look below the “Analyst Opinion”, you will see a summary of how the analysts rate each publicly traded stock on a scale of:

Strong Buy
Buy
Hold
Underperform
Sell

Here are some of their top picks by transportation sector:

LTL

10 of 12 analysts have rated Old Dominion a Buy or Strong Buy

Truckload

9 of 13 analysts have rated Landstar System a Buy or Strong Buy
11 of 18 analysts have rated J.B. Hunt System a Buy or Strong Buy

Railroads

9 of 17 analysts have rated Union Pacific a Buy or Strong Buy
8 of 16 analysts have rated Norfolk Southern Corp a Buy or Strong Buy
4 of 6 analysts have rated Kansas City Southern Railroad a Buy of Strong Buy

Air Delivery & Freight Services

5 of 9 analysts have rated Hub Group a Buy or String Buy
8 of 15 analysts have rated CH Robinson a Buy or Strong Buy

Small Parcel

9 of 17 analysts have rated United Parcel Service a Buy or Strong Buy

So there you have it. For those of you looking to make some “mad money” on the turnaround on the “beaten down” transportation stocks, these are some of the top picks from the experts.