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With the news earlier this month that China’s exports popped up 34.9% in November from the year-ago period and showing month to month growth of 22.9% from October, it is clear that world trade continues to expand from the depths of the "Great Recession." Imports to China increased even more - up 37.7% versus October's 25.3% rise. Of course, the China export/import picture is just the most telling reason for the logistics industry's stellar growth in revenue and profitability. Shipping volumes from Central America and Southeast Asia are also very strong as the world slowly recovers from the financial crisis.

The case for continued strength in the business of logistics firms is obvious from the "Big Boys" like Federal Express (NYSE:FDX) and United Parcel Service (NYSE:UPS) to players like Hub Group (NASDAQ:HUBG). However, the appreciation this year has been so robust that investment ratings in some companies have been reduced to "take profits" or "reduce exposure."

Stifel Nicolaus lowered two logistics company's ratings from Buy to Hold - Pacer International, Inc. (NASDAQ:PACR) and Hub Group - on Dec. 15 after their nice price runs of over 100% and 30% respectively during 2010. C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) was downgraded by Robert W. Baird on Dec. 17 from an Outperform to a Neutral rating after appreciating 80% this year. However, Expeditors International of Washington, Inc. (NASDAQ:EXPD) is up 55% this year and continues to enjoy positive research coverage.

A Rising Tide Lifts All Boats?

All of the aforementioned companies have a market capitalization of over $1 billion. But the opportunity may be in looking at those smaller, little known logistics and freight forwarder companies that have quietly been reporting substantial revenue increases. The old adage that "a rising tide lifts all boats" does apply here, but it may be more of a "rolling tide." Two smaller-cap logistics companies, Radiant Logistics, Inc. (RLGT.OB) with a market cap of $34.8 million, and Janel World Trade, Ltd. (JLWT.OB) with a market cap of just $5.5 million, are understandably under followed. But, judging by their revenue growth, they are also benefiting from the increase in worldwide container and airfreight shipping volumes.

RLGT was discovered by investors in September when the company was nearing the end its fiscal first quarter (ended Sept. 30). The stock price has since increased almost 400% from $0.30 to $1.18 (Dec. 22 price) - a nice reward for those investors who recognized a company executing on its business plan with the logistics sectors' fundamental wind at their backs. The company reported first quarter revenue of over $48 million and a healthy bottom line.

Janel World Trade, however, has apparently yet to be discovered, as the stock price is at its 52-week lows of $0.25 (JLWT price on Dec. 22 is $0.30). At this late juncture in the year, tax loss selling is most likely a contributing factor to the recent weakness, as there has been no negative news. However, the company has pre-announced that its soon-to be-released fourth quarter and annual report for 2010 (ended Sept. 30) will show a minimum of $87 million in revenue (a record year). Additionally, JLWT announced the company had purchased logistics assets from Ferarra International Logistics with annualized revenue of $7 million in October - too late to contribute revenue in fiscal year 2010 but just in time for a full quarter's contribution for the first quarter 2011 ending Dec. 31. JLWT's first quarter (due to be filed Feb. 14) looks to compare very favorably with last year's first quarter (still in recession) and with Ferrara's additional revenue.

With most industry analysts forecasting strong growth in world trade from China, South Asia and Central and South America, along with the Eurozone's need to expand exports, logistics companies are poised for continued increases in revenue and profitability. The key is to identify those company's whose stock price have already discounted 2011's prospects and move to those yet to be fully valued.

Source: In the Logistics Industry, Does a Rising Tide Lift All Boats?