Do improving international economic conditions help?
Langenfeld: Inbound ocean freight volumes, particularly to LA/Long Beach, and airfreight volumes from Asia to the U.S. are typically leading indicators into the health of the U.S. freight economy. Given that the U.S. procures much of our retail goods from Asia generally and China specifically, these freight trends are important. Do you expect any of your companies to lead in a recovery? Langenfeld: Transport stocks historically have bottomed when industry fundaments were at their worst, and have discounted a recovery 6-9 months ahead of improving fundamentals. Our analysis suggests this group outperforms the market for the first 18-24 months. We don’t believe it is too late for investors to enter the sector and we are recommending names with cyclical exposure that possess meaningfully higher peak margin potential than previous cycles. We like Knight Transportation Inc (KNX), CSX Corp (CSX), and JB Hunt Transport Services (JBHT). Lisnic: Historically, building products stocks have been
