Investing in Transportation Stocks

Moving people and things from place to place is big business, and many different transportation companies can take you and your stuff wherever you want. By investing in the stocks of those companies, you can profit from transportation.

Transportation companies have been in the news lately due to supply chain bottlenecks that have caused a wide range of companies to revise their estimates. Ports, railroads, and truckers have been affected. The strong demand has helped pricing power, but labor shortages have led to higher costs and limited the upside for these stocks.

Below, we examine the top transportation stocks and explain how best to invest in them.

Overview

What are transportation stocks?

Transportation stocks are those of companies categorized as industrial businesses, which include everything from heavy equipment makers to transportation service providers. The common link is that all of the companies are involved in the movement of people or goods.

For all of the talk of digital transportation, there is still a fundamental need to move people and goods from point A to point B. While these companies are all in the same business, they don't all compete against each other. Truckers hauling goods on the interstates, for example, don't compete with airlines taking tourists to vacation destinations.

Types

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.

Best transportation stocks

Some top-notch transportation stocks in 2025

Among the best-known transportation companies are the following:

United Parcel Service

An industry leader in package delivery, United Parcel Service (UPS 1.43%) ships billions of packages and documents every year by land, sea, and air. UPS also maintains a network of stores, customer centers, and drop boxes.

Union Pacific

This industrial railroad has an extensive network of tracks in the western two-thirds of the U.S., with several different routes between the Mississippi River and the Pacific Ocean. Union Pacific (UNP 0.89%) ships everything from coal and chemicals to crops and cars.

Today, there is no U.S. railroad that offers coast-to-coast service. But that could change if Union Pacific succeeds in winning regulatory approval to acquire Norfolk Southern (NSC 0.57%). Union Pacific hopes to close the deal in early 2027.

Old Dominion Freight Line

With a massive coverage network, this trucking company serves the continental U.S., Hawaii, and Puerto Rico. Old Dominion (ODFL 0.57%) specializes in "less-than-truckload" or LTL trucking, which involves hauling loads for more than one customer on one truck. It is a complex part of the business that, when done well, can generate higher margins than other parts of the trucking industry.

Kirby

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 -0.88%) delivers bulk liquids to customers on the West, East, and Gulf of America coasts, as well as Alaska and Hawaii.

How to evaluate them

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 0.64%), Southwest Airlines (LUV 0.65%), Delta Air Lines (DAL 0.32%), and JetBlue (JBLU 2.87%) are all competing to take you where you want to go.

Pros and cons

Pros and cons of investing in transportation stocks

Transportation stocks can offer ballast to a portfolio. That said, there are pros and cons to every sector. Factors investors should consider before buying in:

• Demand is ever-present. The need for the service is unlikely to disappear, and large companies tend to have stable revenue and the ability to pay dividends.
• But demand is cyclical, and there is little the companies can do to stimulate demand if their core customers cut back on shipping. When demand falls, revenue can fall with it.

Transportation stocks are best suited for long-term investors who are looking for a mix of income and modest growth, and not for investors seeking the potential for high growth over an extended period of time.

How to invest

How to invest in transportation stocks

1. Open your brokerage app: Log in to your brokerage account where you handle your investments.

2. Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.

3. Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.

4. 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.

5. Submit your order: Confirm the details and submit your buy order.

6. Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

Related investing topics

Should you invest?

Are transportation stocks right for you?

When the economy is strong, transportation companies tend to perform well because plenty of people and businesses want to travel and ship things. But travel and shipping demand can fall dramatically during tough economic times, so transportation stocks are best suited to investors who are comfortable with cyclicality.

Transportation stocks provide direct portfolio exposure to the state of the economy and have a reputation for signaling whether good times or bad are ahead.

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