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Few Guardrails for Trucking Stocks

Constrained truckload capacity should continue to be a tailwind for the transportation industry, but generally lofty valuations mean little margin of safety for investors.

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Matthew Young: In transportation, a hot topic over the past year has been the marked tightening of truckload capacity. It's been most notably felt on pricing in the full-truckload space for carriers like Knight Transportation (KNX), but it's also been a benefit for the asset-light truck brokers like CH Robinson (CHRW). At the heart of the capacity constraints really is the driver shortage. And in essence, what it does is it prevents carriers from boosting fleet size and increases turnover.

And what you have, really, over the past decade or so is a lack of new entrants into the industry, coupled with an aging workforce and, in recent years, really strong demand.

Matthew Young does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.