This U.S. tank barge operator uses the entire Mississippi River watershed as a conduit for moving goods through the U.S. heartland. Kirby (KEX -0.51%) delivers bulk liquids to customers on the West, East, and Gulf of America coasts, as well as Alaska and Hawaii.
How to invest in transportation stocks
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Different types of transportation stocks
There are many different companies that fall under the transportation header.
- Airlines, which fly passengers.
- Air freight companies, which fly cargo.
- Railroads, which move passengers and freight by train.
- Trucking companies, which haul goods by road.
- Marine shipping companies, which move products by sea.
- Logistics companies, which use a variety of transportation modes to ensure things are moved quickly and efficiently.
- Service providers, such as airport operators, marine ports, and private toll-road companies, which help other companies to provide all modes of transportation.
Not all companies that move things are treated as transportation stocks. For example, pipeline companies that move crude oil, natural gas, and water are classified as energy or utility stocks.
How to evaluate top transportation stocks
To assess the merits of transportation companies, keep the following factors in mind.
Fixed and operating costs
Transport companies tend to have high fixed costs, which are the costs that remain the same regardless of the quantity of goods or services sold. The best transportation companies keep their fixed costs under strict control.
A transportation company's operating ratio -- its operating costs as a percentage of revenue -- is also important. Operating costs differ from fixed costs because they vary in direct proportion to the quantity of goods or services sold.
Most transportation companies use a lot of energy, so their financial performance is directly linked to the price of crude oil. Whether the company needs jet fuel for planes, diesel fuel for trucks and trains, or a combination of electricity and natural gas to operate industrial equipment, the best transportation companies prioritize maximizing their fuel efficiency.
Indebtedness
With high fixed costs, transportation companies need a lot of money to buy or create the needed equipment. Many choose to finance capital expenditures using long-term debt, but the best transportation companies are careful to keep their debt at manageable levels.
Competitive strength
You can evaluate a company both on a stand-alone basis and in comparison to its competitors. Competition in the transportation sector can be fierce, with many companies fighting to serve the same customers. Using the U.S. airline industry as an example, carriers such as United Airlines (UAL -3.74%), Southwest Airlines (LUV -2.76%), Delta Air Lines (DAL -2.31%), and JetBlue (JBLU -1.42%) are all competing to take you where you want to go.
