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.
These companies are a hot topic right now because global supply chains have come under severe pressure in recent years. Factors contributing to supply chain issues have included:
- Trade tariffs.
- COVID-19 lockdowns.
- Geopolitical tensions, like the conflict in Ukraine and the Middle East, spilling over into trade disruptions.
These pressures have led to negative revisions to earnings estimates, higher prices, and fears of a recession.
For decades, ever-closer and interlinked global supply chains 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. Unfortunately, that's precisely what has happened.
Five stocks to watch
Five 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 | Market Cap | Description |
|---|---|---|
| UPS (NYSE:UPS) | $112.2 billion | Domestic and international package delivery, supply chain services |
| CSX (NASDAQ:CSX) | $65.7 billion | East Coast railroad |
| Old Dominion Freight Line (NASDAQ:ODFL) | $41.2 billion | Less-than-truckload shipping |
| Trimble (NASDAQ:TRMB) | $15 billion | Positioning technology hardware and software |
| Manhattan Associates (NASDAQ:MANH) | $17.5 billion | Supply chain solutions 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 -0.75%) have faced challenges in recent years as the pandemic-inspired boom in deliveries led to a significant increase in capacity in the industry.
A combination of slowing economic growth and a natural correction in consumer behavior (moving back to spending on travel and services rather than on products) negatively impacted volume growth, putting pressure on margins.
As such, UPS is working through these issues while focusing on growing in targeted end markets like healthcare and small and medium-sized businesses (SMB). It could take time, but UPS will surely recover as volumes eventually improve and the industry adjusts capacity to catch up with demand trends.
2. CSX
2. CSX
There's been a quiet revolution in the railroad sector over the past decade. All 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 follow key metrics such as car velocity, terminal dwell, and train length to improve performance.
In addition, they tend to run trains from point to point on fixed schedules rather than the old 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 supply chain players. 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 securing materials and components suffered by many companies since the pandemic hit.
In addition, shifting manufacturing production away from countries with higher carbon emissions toward countries adopting technologies to reduce carbon emissions, such as the U.S., will also benefit railroads.
3. Old Dominion
3. Old Dominion Freight Line
One of the most respected names in trucking, Old Dominion is a specialist in the less-than-truckload (LTL) shipping industry. Whereas full-truckload (TL) shippers tend to deliver a truckload for one customer, LTL trucks can carry freight for multiple customers. That's a key advantage in a supply chain crisis since many customers are willing to pay more money to ensure critical components are delivered.
Old Dominion sports some of the highest margins in the transportation industry. In fact, the company has been on an impressive uptrend over the past decade. Margin growth was especially strong during the COVID-19 pandemic as 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. Moreover, 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. While the supply chain crisis has raised awareness of the need to improve supply chain management, Manhattan has another powerful growth driver. The COVID-19 pandemic has also accelerated retailers' omnichannel capabilities. Retailers are increasingly selling through various channels, whether it's in-store, online, by phone, etc. -- 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 look excellent, with Wall Street analysts penciling in double-digit revenue growth for the foreseeable future.
