The supply chain is the system that moves goods, services, and raw materials throughout the world. Supply chain stocks include transportation companies (such as railroads, trucking companies, and shippers), delivery companies, and freight companies. They also include logistics companies, supply chain software businesses, and services companies.
Global supply chains have come under severe pressure in recent years. Factors contributing to supply chain issues have included:
- Trade tariffs.
- Geopolitical tensions, such as conflicts in Ukraine and the Middle East, are spilling over into trade disruptions.
These pressures have led to negative revisions to earnings estimates, higher prices, and fears of a recession.
For decades, increasingly interconnected and interlinked global supply chains have operated under "just in time" principles. Under this strategy, materials and products are moved "just" before they are used or sold, leaving the supply chain susceptible to sudden shocks.
5 stocks to watch
5 supply chain stocks to watch in 2025
As a result of supply chain disruptions, investors are naturally looking to buy stock in companies poised to help corporations deal with related challenges. The stocks listed below are ways to invest in the supply chain theme.
| Company name | Company ticker | Market cap | Industry |
|---|---|---|---|
| United Parcel Service | NYSE:UPS | $86 billion | Air Freight and Logistics |
| CSX | NASDAQ:CSX | $62 billion | Road and Rail |
| Old Dominion Freight Line | NASDAQ:ODFL | $35 billion | Road and Rail |
| Trimble | NASDAQ:TRMB | $18 billion | Electronic Equipment, Instruments and Components |
| Manhattan Associates | NASDAQ:MANH | $12 billion | Software |
1. UPS
1. UPS
Package delivery giant UPS is a key player in the logistics and supply chain industry. Both UPS and FedEx (FDX 3.77%) have faced challenges in recent years, as the COVID-19 pandemic-inspired surge in deliveries led to a significant increase in industry capacity.
A combination of slowing economic growth and a natural correction in consumer behavior (a return to spending on travel and services rather than on products) hurt volume growth, putting pressure on margins.
As such, UPS is addressing these issues while focusing on expanding in targeted markets such as healthcare and small and medium-sized businesses (SMBs). At the same time, UPS is deliberately reducing its low- or negative-margin Amazon (AMZN 2.66%) deliveries to focus on higher-margin deliveries within its network.
It could take time, but UPS should recover as volumes eventually improve and the industry adjusts capacity to catch up with demands.
2. CSX
2. CSX
There's been a quiet revolution in the railroad sector over the past decade. All of the leading players, including CSX, have adopted precision scheduled railroading (PSR) management techniques. The strategy aims to run the same volumes while using fewer assets. PSR practitioners closely monitor key metrics to enhance performance, including car velocity, down time, and train length.
Additionally, they tend to operate trains on fixed schedules from point to point, rather than the traditional hub-and-spoke model. The leading railroads have reduced their operating ratio (expenses divided by revenue), leading to higher profit margins.
CSX and the other railroads are key players in the supply chain. However, they also have a role to play in alleviating some of the problems created by supply chain dislocations. For example, if Europe is phasing out Russian energy, then the U.S. has an opportunity to export energy through East Coast terminals. Similarly, U.S. railroads will benefit from a shift toward onshoring -- a move encouraged by the difficulties many companies have faced in securing materials and components.
Shifting manufacturing production away from countries with higher carbon emissions toward countries adopting technologies to reduce carbon emissions will also benefit railroads. That said, there are also potential headwinds from the fallout of tariff disputes and their effects on trade flows.
3. Old Dominion
3. Old Dominion Freight Line
One of the most respected names in the trucking industry, Old Dominion is a specialist in the less-than-truckload (LTL) shipping sector. Full-truckload (TL) shippers typically deliver a truckload to a single customer. Less-than-truckload (LTL) trucks can carry freight for multiple customers, a key advantage in a supply chain crisis, since customers often are willing to pay more to ensure critical components are delivered.
Old Dominion sports some of the highest margins in the transportation industry. The company has been on an impressive uptrend over the past decade. Margin growth was especially strong during the 2020-22 period when Old Dominion was able to be more selective about deliveries, given surging demand.
Although freight demand will naturally oscillate with the economy, Old Dominion is a high-quality operator in the LTL industry. Long-term LTL demand is likely to grow due to the growth in e-commerce deliveries, which require relatively small loads to be delivered as part of companies' online sales campaigns.
4. Trimble
4. Trimble
Investors may wonder what a positioning technology company is doing on this list. The answer is simple: Trimble's technology is on 99% of the top 200 trucking fleets in the U.S. The transportation and logistics segment contributes about a quarter of the company's overall sales.
Using Trimble's hardware and software, trucking companies can monitor and adjust their fleets in real time. By doing so, they can increase fleet utilization and reduce fuel costs.
In addition, trucking operates throughout the supply chain. Trucking companies transport raw materials and finished goods to distribution warehouses and, ultimately, to stores or even directly to the customer. As a result, Trimble's technology can improve return on investment across the supply chain. It's a key benefit for companies looking to cut supply chain costs and improve productivity.
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5. Manhattan Associates
5. Manhattan Associates
Manhattan Associates produces software used to manage the supply chain and inventory for the retail, wholesale, distribution, and manufacturing end markets.
Retailers are increasingly selling through various channels, whether in-store, online, by phone, or other means -- a move encouraged by the lockdowns imposed in response to the pandemic. It's a trend likely to continue into the foreseeable future as the share of retail coming from online sources is likely to increase.
As a result, supply chain management is becoming more complex for retailers and logistics operations in distribution centers and warehouses. All of this plays to Manhattan's strength. The company's long-term growth prospects appear excellent, with Wall Street analysts forecasting double-digit revenue growth for the foreseeable future.
