Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
Old Dominion Freight Line shows how the best businesses use a downturn to take share and lead the recovery. Through the longest freight recession in modern history, with manufacturing PMI contracting in 32 of 34 months, it still raised revenue per shipment 4-5% a year and kept return on equity above 15%, as every year since 2011. The stock lagged the market by about 50% at the trough but has now broken out to new highs, flipping the Dow Theory signal to confirm the economy. x.comÂ
UPS, Saia and XPO are among the most exposed to competitive and price pressure from Amazon's new Supply Chain Services, yet their shares have glossed over it, with UPS up almost daily for two weeks. LTL and parcel demand is lagging, and these carriers have relied heavily on price to offset higher costs and weaker volumes. Amazon's entry should squeeze both sides, especially for domestic players. Broader trucking has support from regulatory crackdowns and AI-related flatbed demand. x.comÂ
FedEx Freight has significant upside on even a partial re-rating toward Old Dominion and Saia, as onshoring construction drives LTL demand. If housing reverts, demand could really amp up. Diesel costs are a concern, though FedEx Freight can add surcharges or raise rates in near real time, unlike garbage haulers Republic Services and Waste Management, which are locked into long-term municipal contracts. Tax-loss selling is the other risk, and the near term is hard to call. x.comÂ
Old Dominion and Saia look well placed as solid-balance-sheet LTL consolidators: such periods have historically been good for them, and FOX reports trucking bankruptcies amid surging diesel costs. At current valuations, they look roughly equally attractive. x.com x.comÂ
Amazon's new Supply Chain Services is an AWS moment that favors Amazon over UPS and FedEx. Amazon is opening the logistics network it built for itself, over 100 cargo planes, 80,000 trailers, 24,000 intermodal containers and a 30-year warehouse network with AI forecasting, to all businesses, starting with P&G, 3M and American Eagle. UPS and FedEx saw this coming for years and did almost nothing, making it a Blockbuster-versus-Netflix moment for logistics. x.com x.comÂ
Amazon's logistics network protects its investment case against AI agents that could hurt its platform: agents cannot rebuild its delivery infrastructure, which has reportedly become America's largest parcel carrier. x.comÂ
Amazon still has many positives, with Prime and logistics as big moats, but AI shopping agents are a real complication. Customers used to buying on Amazon without looking around could be steered elsewhere: ChatGPT found in seconds a $38 Walmart bookshelf that 20 minutes of searching Amazon missed. That is a problem with no easy answers for a platform designed to be the only place customers look, and for ad and lead-gen businesses; Amazon has blocked agents such as ChatGPT from its listings. … Show more
Trucking and freight brokerage stocks look extended and expensive, pricing in an improbably steep earnings ramp. CDL licensing is tightening capacity and AI capex buildouts help areas such as flatbed, but J.B. Hunt trades near 30x next year's earnings. XPO is the most egregious, as less-than-truckload carriers will lag the upcycle while adding capacity. Landstar faces weak brokerage margins and platform pressure versus other public brokerages, before AI's effect on take rates. x.comÂ
Aurora could become the platform for driverless trucks, with its market cap able to rise 4-5x or more if it executes. It runs the only fully driverless trucks operating commercially at scale on a major US interstate, hauling freight for a Berkshire company on live Texas lanes, with ample cash to scale. Revenue should go from about $15M this year to about $190M next as the fleet grows, then a capital-light model should lift margins. A reply notes freight carriers still keep drivers in cabs. x.com … Show more