Monday, February 28, 2005

On the road again ...

Yellow Roadway (YELL) today announced that it is buying USF Corp (USFC). Though rumored for a while now, the high premium came as a surprise.

This is the second major acquisition for Yellow in as many years. I had bought Yellow as a takeover target more than a year ago. With today's acquisition, Yellow doesn't remain a target anymore, and I will be selling my shares soon.

Though not being bought out is a disappointment, the stock has more than doubled, and a 120% gain is nothing to complain about!

I follow trucking and rail stocks closely.

2 trucking stocks worth considering now are SCS Transportation (SCST) and Sirva (SIR). I own a few of Sirva, which is the safer of the two given its large European operation and also a presence in Asia. It is a good time to start buying SCS, but be prepared to average down.

A related area of interest is regional railroad companies. RailAmerica (RRA) and Providence and Worcester Railroad Company (PWX) are priced fairly now and are surely being eyed by the rail majors. I own a few of RRA and I am planning to add both at current prices.

While the larger trucking and rail companies are very expensive given the large following on Wall Street as well as among newsletter editors, the smaller ones have been mostly ignored. With the Walmart / China effect showing no signs of slowing down, consolidation in this field will continue. The smaller / cheaper players will be taken out sooner or later.

CAFTA (Central American Free Trade Agreement) will provide additional boost to freight companies as land transport restrictions start to ease.


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