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Andrew T. Gillies is Director of Communications at the Center for Audit Quality, an affiliate of the American Institute of CPAs, in Washington, DC. Based in Washington since 2002, he has also worked in editorial and communications roles at the Investment Company Institute, the World Bank, Forbes, and Vault.com. His policy-themed writing has focused on aerospace and defense, energy and environment, transportation, and financial services.

Wednesday, July 30, 2003

Freight Stocks: Riding The Rebound

WASHINGTON - With fuel prices stabilizing and manufacturing showing signs of recovery, transportation and freight companies have attracted investors. Since a mid-March low, transportation stocks in the S&P 500 have nearly kept pace with the 24% rise in the overall index.

So are there bargains left among the transports? We scanned the Multex database and found a few stocks that still look reasonable. Our criteria: price-to-sales and price-to-book multiples below five-year averages; latest 12-month sales of $400 million or greater; three-year revenue growth (annualized) in positive territory; and estimated annual earnings growth of 10% or better over the next three to five years.

Our screens snared a few passenger airlines, but we left out those more speculative bets in favor of air freight couriers, railroads and truckers. John Escario, manager of the Rydex Transportation Fund, thinks the latter group is particularly well-poised to benefit from an eventual economic recovery. "They've had to go through a lot of pain," he says, noting that some 7,000 trucking outfits have gone bust since 2001. Result: less capacity, steadier prices and better cost control for the survivors.

Full story at Forbes.com