Friday, February 26, 2010

Bullish Comments on the Economy

I went to go see Ken Hoexter yesterday, who is a very good transportation analyst at Merrill Lynch.

I have followed Ken for years. I like his approach: he is very data-driven, and relies on company analysis and the data to drive his stock recommendations rather than "gut feel".

Ken had upgraded the group about a year ago, and if you had followed his advice you profited handsomely.

In any event, his comments yesterday were surprisingly bullish on both the economy and his stocks in particular (I say "surprising" since most analysts seem to be pretty gloomy). As it turns out, he just sent out his weekly piece, so I thought I would pass along a portion which describes his thoughts (I have added the highlighting):

  • Carloads and tonnage highlight recovery
Rail carloads were up 7.3% year-over-year this week (to
732,350) and truck tonnage was up 5.7% for January,
continuing a trend of steady, but increasingly robust freight
transportation data. The data suggests that the stranglehold
of the 4-year freight recession has been surpassed, with
tonnage up for a second consecutive month for the first
time since September 2008. We increased our rail targets
on the strength of better than expected rail carloadings
(volumes were running 200 bps faster than our target, and
we noted a bias for further upside potential given the
ongoing strength in volumes). We are also encouraged by
the breadth of the rail commodity rebound, which is driven
by chemicals, autos, metals, export coal, domestic
intermodal, and 'less worse' than expected utility coal
declines. Alternatively, UPS noted that retail, health care,
and tech volumes were leading the rebound, leaving the
machinery portion of industrial production a bit out of the
loop, and thus keeping pressure on weight per shipment (a
factor it looks to turn upward before margins can regain
prior heights).