Trucking Stocks Led the Pack Last Week: Can They Keep Rolling?

Key Points

• Trucking stocks led the price action in the industrial sector, signaling where the market thinks the next opportunity may be hidden.
• Three names stand out because institutional buyers have been boosting their positions in the companies by double-digit rates.
• Then, there is the bearish capitulation spotted in the declines in short interest for these stocks, which means there is more bullish evidence to back them.

Price action can be one of the best indicators for investors to keep track of when figuring out where the market is trying to go in the coming quarters. As it turns out, most – if not all – asset classes rose tremendously the morning after the United States presidential elections, and as Warren Buffett says, all boats will do well on a rising tide.

Buffett also likes to say that when the tide goes out, investors will know who was swimming fully clothed or not. As it relates to price action, this concept is the key to figuring out what might be headed for the U.S. economy in the coming quarters. All roads lead to a single common trend. By spotting and riding with it, investors have a better-than-average chance of beating the market.

The trend has been spotted in transportation stocks, particularly those involved in trucking. Shares of SAIA Inc. NASDAQ: SAIA, J.B. Hunt Transportation Services Inc. NASDAQ: JBHT, and even XPO Inc. NYSE: XPO are the subject of discussion after the industry delivered one of the top-performing rallies during the week of the election. The implications point to a trend investors should not only be aware of today but also consider following for their own gain.

Will Analysts Revise SAIA Stock Targets Amid Surging Demand?

The answer is they likely will, as the stock blew past the consensus price target of $492. Wall Street analysts might go into the new week under pressure to update their valuations and price targets on SAIA stock. However, the technical price action is not the only reason they should consider this; there are other fundamental factors at play in this view.

By outperforming all the other industrial niches of the economy for the week, trucking stocks have sent a very strong message for every investor to consider: that business activity within the United States might take on a new uptrend.

After contracting by as many as 24 months consecutively, the manufacturing PMI index now poses as a potential underwater volleyball ready to shoot out of the water, blowing past any other peers and industries for those willing to get behind the message markets just sent.

This might be why Allspring Global Investments Holdings decided to allocate up to 64.6% more of their capital into SAIA stock as of October 2024, bringing their net institutional positioning to a high of $109.6 million today. At the same time, this action amplifies the bullish evidence for the company today.

Then, there is the 12.5% collapse in short interest for SAIA stock over the past month, signaling a significant amount of bearish capitulation and opening the way for a new potential rally in the stock.

Why XPO Stock Justifies Its Premium Valuation Among Peers

While the rest of the transportation sector trades at an average price-to-earnings ratio of only 14.8x today, XPO stock calls for a significant premium by trading at a much higher valuation of 48.7x today.

While some may call this expensive, investors must remember that stocks with a better-perceived future will always trade at premium valuations.

XPO is no exception to this trend. Like its close peer SAIA, XPO stock saw an up to 10.8% decline in its short interest over the past month, opening some room for bulls to replace the bears who were forced to ditch their short positions in the face of the accumulating bullish evidence in XPO.

Investors can see this happening by the 11.3% boost in holdings coming from those at Clearbridge Investments LLC, who now hold up to $264.1 million worth of XPO stock, representing an ownership rate of as much as 2.1% today. After the stock rallied by over 15.6% in a single week, the message is that the ceiling for this stock might be much higher, considering the fundamental tailwinds at play here.

Institutional Investors Dive Into J.B. Hunt Stock After U.S. Election Results

Only a few days after the election results were out, and the price action made it clear that trucking stocks would be a potential favorite for the market in the coming quarters, those at Parnassus Investments LLC decided to increase their exposure to J.B. Hunt stock by as much as 14.1%.

This new allocation brought their net holdings to a high of $129.8 million today, adding to the wave of institutional buying sprees surrounding these stocks. These buying sprees reflect a bullish future view for the industry.

While not by much, daily trading volume increased for J.B. Hunt stock the morning after the election; up to 1.5 million shares were traded for the day, nearly double the average volume of only 880,000. Institutional buyers looking to get a piece of the action in trucking stocks might have aided the renewed trading interest for the coming months.

Now that the landscape has been made clear, there are more pros than cons for investors to consider putting on long positions in these names ahead of what’s coming to them.