This is a bit dated, but bear with me. Last week, Jevic Transportation [JEVC] closed down. It looks like it is liquidating. On the next day, trucking stocks fell as a result. Are things tough in the trucking industry? You bet. Volumes are low, and fuel costs are high.
Now, Jevic wasn’t that big, but if I see a few more large-ish Truckers disappear, I will move to a major overweight in trucking stocks. Why? Pricing power will return to the remaining trucking firms, and after a time, the stocks will rebound. That’s what happened to steel in 2002. I owned Nucor, and did quite well, though, I sold too soon.
When my next reshaping comes up, I will toss some of the highest quality trucking stocks into the mix. The idea is that if the industry weakens further, they will remain among the survivors, but if pricing power comes back, I will make more than adequate profits.
Now, if you have read me for a while, you know I like to rotate sectors within a value discipline. I do well at it. But who is the best of them all? Ken Heebner. Now, that’s a guy I would love to learn from. I deliberately don’t let sector rotation become the whole strategy because I am trying to limit risk. I also don’t trade like a maniac, because I can’t do that well. But I do more than adequately, and all of us could learn from the expertise of Ken Heebner. Unlike Peter Lynch, who was totally bottoms up, there are real advantages that come through analyzing the economy, particularly individual industries. But, if most investors ignore economics, or, if they only focus on broad macroeconomics, that’s fine with me. I will focus on the economics of industries, and that will help me invest well.