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A Decidedly Low Tech Play: YRC Worldwide—Buy, Sell or Hold?

|Includes: YRC Worldwide, Inc. (YRCW)

Trucking is back, and back in a big way.  Heck, there are even reality shows like Ice Road Truckers bringing the recently beat down sector into the limelight.  The improved economy has lifted truck tonnage levels to the highest point since mid 2008, and according to the American Trucking Association (ATA), the seasonally adjusted advance index of for hire truck tonnage surged 2.2% last month.  The index is presently at 111.6 but volumes remain choppy.   This isn't surprising as the economy is still in the baby step phase of recovery. According to  ATA Chief Economist Bob Costello “Fleets continue to tell me that freight volumes are very choppy — up one week, but down the next. That is a trend that is likely to continue this year as the economy is not growing across the board yet.”

The growing economy combined with the increased public visibility of the sector makes it an intriguing place to look for investment.    The first company that jumped out at me as an obvious choice was YRC Worldwide (Nasdaq: YRCW).  This $165 million, Memphis-based trucking company was trading at a split adjusted price of more than $1,400 per share not so long ago.

Due to bad debt decisions, the company has been forced to renegotiate its loans 19 times, and the stock is now trading near $4per share.  That is a tremendous drop and may represent opportunity for savvy, risk taking investors.   If the company can find a way out of the debt conundrum, the upside potential is dramatic.

Technically, in mid-January, price burst above the 50-day moving average indicating a new uptrend was starting.  It has pushed higher over the last several days hitting a high of $4.50 yesterday prior to falling back.  It's trading above the upper Bollinger Band on the daily chart, indicating over extension, but as you know, prices can remain in a technically overextended state for some time.