Monday, May 16, 2005

A truckload of M&A

In a surprising deal, UPS today announced an all-cash deal to buy Overnite (OVNT), at almost a 50% premium. This is most likely a reaction to Fedex's similar moves (a few years earlier).

I had written earlier that the entire trucking sector looks very attractive now, and this premium today is indicative of the value that is being discounted.

I did not own Overnite shares, but do own a few other trucking stocks. A number of trucking stocks have pulled back substantially in the last few months. A pullback of this nature is usually associated, atleast for those who follow the Dow Transportation index, with a slowdown or recession. In fact, given the rate hikes and more importantly the money supply squeeze, there is likely to be a recession (hopefully a mild one) within the next 2 or 3 quarters. But the strong insider buying in these trucking stocks points to a good turn of events 8-10 months down the road.

Trucking stocks worth considering seriously now - Sirva (SIR), SCS Transportation (SCST), Covenant Transport (CVTI), Swift Transportation (SWFT), US Xpress Enterprises (XPRSA), Dynamex (DDX), Quality Distribution (QLTY). The same day delivery and less-than-truckload (LTL) sector players are ripe takeover targets.

I own Sirva, Covenant stock and am actively evaluating the rest in the above list.


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