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As the world ever so slowly works its way out of the recession it is time to look at all of those companies that move merchandise across the globe. Trading freight movement is not just about Maersk putting more container ships back into operation or the Burlington Northern shipping more freight. It may have to do with obscure companies in little Panama where the Panama Canal expansion will allow huge ships to pass. It may have to do with the unknown companies that source shipments and offer logistics services to increase shipping efficiency. In trading the rallies and retreats of the stock market it may be time to look at trucks, planes, and express delivery companies.
In looking for where in the world the action will be don’t overlook the giants of the shipping industry and don’t forget the little guys. Huge global and transnational shippers have the advantage of being high cost of entry businesses in the recession. Companies that own huge tankers and container ships, companies that have the right of way to thousands of miles of railroad tracks, and companies with fleets of thousands of trucks all have a distinct advantage in a world of shrunken credit. Trading freight movement will start with knowing who has a head start as the recession gives way to economic growth.
In trading the movement of freight a little technical analysis will come in handy. It may not be necessary when trading and the stock starts to move but it will help find the right companies to trade. In a post recession world competition for fewer dollars will reward efficiency. Those who can keep their costs down and those who used the recession to tune up their business and cut the fat will likely do better in the coming months and years. Looking at price to earnings ratios, asset to debt ratios, and age of the company’s trucks, trains, or boats will come in handy. Anyone who has to deal with equipment breakdowns won’t be as profitable as someone who has had the cash to upgrade.
Before thinking about how straddles in the recovery market apply to transnational shippers or how a head and shoulders charting pattern may apply to express shipping companies look at the basics of their businesses and look at who they do business with. Many companies outsource technical aspects of their businesses. This is not outsourcing to Asia to get cheap labor. It is outsourcing to very bright people who facilitate the sourcing of freight shipments, oversea tracking systems, and maintain the software that makes sure that efficiency leads to profits. These companies may be harder to find but in trading freight movement they may well be more profitable than trading the big guys.
While you are thinking of trading Toyota and it recall problems think about trading freight movement. Find out who ships their parts to the USA from Japan. A downturn in Toyota sales could cause a dip in someone’s business on cross Pacific routes. Likewise when thinking about trading the GM IPO think who ships their cars.
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