With the growth of e-commerce and supply chain demands, investing in trucking companies has become an attractive option for many investors. However, not all trucking companies are created equal when it comes to investment potential. Here are some key factors to consider when evaluating trucking companies to invest in.
Focus on well-established companies with large fleets and extensive routes
Look for larger, more established trucking companies that have been in business for many years. Companies like J.B. Hunt, Knight-Swift, Schneider National have large fleets with thousands of trucks and established networks across North America. The stability and scale of their operations make them lower risk investments compared to smaller companies.
Choose companies with a mix of contract and spot market freight
The best trucking companies from an investment perspective have a healthy mix of contract freight and spot market freight. Relying too heavily on either can be risky. Contract freight provides stability while spot market freight offers higher margins. A balanced mix provides both stability and upside potential.
Favor companies with high safety ratings and compliance scores
Trucking companies with poor safety records and compliance scores tend to have higher risks and costs. Check ratings like CSA scores and SmartWay certification. Companies like C.H. Robinson and J.B. Hunt consistently get high marks for safety and compliance.
Focus on asset-based trucking companies with physical fleets
Asset-based trucking companies that own actual trucks and employ drivers have more control over service quality and costs. They also have hard assets that retain value over market cycles. Compare this to non-asset brokers that are more vulnerable to market volatility.
Choose companies with strong technology and automation capabilities
Top trucking companies today are deploying technology like telematics, routing software, self-driving trucks to improve efficiency and cut costs. This gives them an edge over trucking companies with outdated IT systems. Progressive companies like TuSimple and Embark are leading this trend.
In summary, some key factors to evaluate when investing in a trucking company are fleet size, customer mix, safety record, asset mix, and technology capabilities. The companies that score well across these criteria are most likely to provide the best risk-adjusted returns over the long run.