1 00:00:07,760 --> 00:00:11,320 Speaker 1: Hi everyone, and welcome to Bloomberg Intelligence Talking Transports podcast. 2 00:00:11,360 --> 00:00:15,080 Speaker 1: I'm your host Lee Glasgow, Senior Freight transportation Logistics analyst 3 00:00:15,080 --> 00:00:18,919 Speaker 1: at Bloomberg Intelligence, Bloomberg's in house research arm. We're delighted 4 00:00:18,920 --> 00:00:24,360 Speaker 1: to have admit Metro Truck to the podcast. He is 5 00:00:24,440 --> 00:00:28,320 Speaker 1: the Managing Director in charge of Transportation and Shipping research 6 00:00:28,440 --> 00:00:32,640 Speaker 1: at Deutsche Bank. His coverage includes trucking, logistics brokers, air 7 00:00:32,680 --> 00:00:37,320 Speaker 1: freight rails in all maritime shipping verticals, a metachieved rank 8 00:00:37,400 --> 00:00:41,800 Speaker 1: positions and Industrial Investors or II survey in more than 9 00:00:41,880 --> 00:00:44,800 Speaker 1: one category in the last seven years, most recently this 10 00:00:44,920 --> 00:00:48,599 Speaker 1: past year in twenty twenty three, achieving the number two 11 00:00:48,720 --> 00:00:51,560 Speaker 1: position in shipping and the number three position in air 12 00:00:51,640 --> 00:00:55,800 Speaker 1: freight and surface transportation. He was previously recognized by Thomson 13 00:00:55,840 --> 00:00:58,360 Speaker 1: Reuters as the number one stockpicker and air freight and 14 00:00:58,360 --> 00:01:03,720 Speaker 1: logistics sector. It has over twenty years of experience covering 15 00:01:03,760 --> 00:01:06,960 Speaker 1: the industrial sector from both the sell and buy side perspectives, 16 00:01:07,040 --> 00:01:11,600 Speaker 1: including global autos and autoparts, aerospace and defense, capital goods, 17 00:01:11,600 --> 00:01:15,360 Speaker 1: transportation and shipping. I'm it, Welcome to the podcast. 18 00:01:15,560 --> 00:01:17,480 Speaker 2: Thanks Lee, great to be here, Thanks for the invitation. 19 00:01:18,160 --> 00:01:22,080 Speaker 1: Yeah, it's great. It's great to talk to you. You know, 20 00:01:22,120 --> 00:01:25,560 Speaker 1: I've always been on the lookout for your calls. You've 21 00:01:25,600 --> 00:01:27,959 Speaker 1: had some great calls over the years. One of them 22 00:01:28,040 --> 00:01:29,959 Speaker 1: is in the LTL space. 23 00:01:30,800 --> 00:01:31,319 Speaker 3: SIA. 24 00:01:31,640 --> 00:01:34,280 Speaker 1: That's that's a stock that's up pretty considerably. I think 25 00:01:34,360 --> 00:01:36,319 Speaker 1: in the last five years, it's up over seven hundred 26 00:01:36,360 --> 00:01:39,520 Speaker 1: percent versus the SMP, which is up around eighty five percent. 27 00:01:40,000 --> 00:01:42,319 Speaker 1: Why has that been one of your your favorite names? 28 00:01:43,200 --> 00:01:45,679 Speaker 2: Well, Saya, you're right, I mean, it's up over seven 29 00:01:45,720 --> 00:01:47,680 Speaker 2: hundred percent of the last five years. Not only has 30 00:01:47,680 --> 00:01:51,800 Speaker 2: it outperformed the SMP, it's outperformed Apple and Microsoft and 31 00:01:52,040 --> 00:01:56,280 Speaker 2: Amazon and so whoever said transportation and trucking camp be sexy, 32 00:01:56,880 --> 00:01:59,680 Speaker 2: take a look at SAIA stock over the last five years. 33 00:02:00,520 --> 00:02:04,720 Speaker 2: You know, very simply, Uh, most LTL companies that are 34 00:02:04,760 --> 00:02:09,600 Speaker 2: non unionized have an opportunity to be significantly more profitable 35 00:02:10,120 --> 00:02:14,000 Speaker 2: over time. And ODFL has kind of trail blazed that 36 00:02:14,200 --> 00:02:16,800 Speaker 2: path and is kind of the north star of what 37 00:02:16,919 --> 00:02:23,440 Speaker 2: is possible when execution and service and price discipline all 38 00:02:23,480 --> 00:02:28,320 Speaker 2: converged to create this tremendous value and and and and 39 00:02:28,400 --> 00:02:31,720 Speaker 2: so SIA is really on that path. And so what 40 00:02:31,800 --> 00:02:34,080 Speaker 2: I like to continuously say, is SIA is when the 41 00:02:34,120 --> 00:02:38,480 Speaker 2: opportunity meets the execution or where the execution meets the opportunity. 42 00:02:38,760 --> 00:02:41,920 Speaker 2: And so you know, we as as as financial analysts, 43 00:02:42,160 --> 00:02:45,200 Speaker 2: it's very easy to put some numbers down on spreadsheets 44 00:02:45,200 --> 00:02:47,880 Speaker 2: and get to some pie in the sky blue sky scenario, 45 00:02:48,360 --> 00:02:51,799 Speaker 2: but it's the management team that has to deliver and execute. 46 00:02:51,960 --> 00:02:54,600 Speaker 2: You're in year out, decade after decade, and we think 47 00:02:54,600 --> 00:02:57,080 Speaker 2: that's exactly what sia's management team is doing. And so 48 00:02:57,960 --> 00:03:00,840 Speaker 2: you know, what's really interesting is that SAIAH is up 49 00:03:01,000 --> 00:03:03,160 Speaker 2: seven hundred percent over the last five years, or over 50 00:03:03,200 --> 00:03:05,720 Speaker 2: seven hundred percent, like I said, Lee, But we just 51 00:03:05,800 --> 00:03:09,600 Speaker 2: published a report four or five days ago basically saying 52 00:03:09,600 --> 00:03:13,360 Speaker 2: that SAYA shares can double from here, meaning over one 53 00:03:13,400 --> 00:03:16,079 Speaker 2: thousand dollars per share by the end of twenty twenty six. 54 00:03:16,240 --> 00:03:19,760 Speaker 2: And just to contextualize that, what's behind that. Ultimately today 55 00:03:19,840 --> 00:03:24,760 Speaker 2: SIAH only generates sixty dollars of profit per shipment over 56 00:03:24,800 --> 00:03:28,239 Speaker 2: the next you know, compare that to odfl. ODFL generates 57 00:03:28,240 --> 00:03:31,000 Speaker 2: about one hundred and forty dollars of profit per shipment. 58 00:03:31,040 --> 00:03:34,239 Speaker 2: So when you close that gap, we think that's what's 59 00:03:34,320 --> 00:03:37,760 Speaker 2: driving the tremendous opportunity in SIA and why we recommend 60 00:03:37,760 --> 00:03:39,640 Speaker 2: people put new money to work in the name today 61 00:03:40,160 --> 00:03:42,960 Speaker 2: despite the massive run the company has had. But the 62 00:03:42,960 --> 00:03:46,120 Speaker 2: bottom line is is that you know, it's really about 63 00:03:46,160 --> 00:03:48,800 Speaker 2: when the execution meets the opportunity, and I think that's 64 00:03:48,840 --> 00:03:51,480 Speaker 2: where That's where SIA is and has been for the 65 00:03:51,520 --> 00:03:52,880 Speaker 2: last few years and will continue to be. 66 00:03:54,760 --> 00:03:54,960 Speaker 3: Right. 67 00:03:55,000 --> 00:03:57,640 Speaker 1: And I'm just for our listeners out there. ODFL is 68 00:03:57,720 --> 00:04:01,840 Speaker 1: Old Dominion Freight Lines. That's a publicly traded company. H 69 00:04:02,080 --> 00:04:03,760 Speaker 1: Do you have buyers on both names? 70 00:04:03,760 --> 00:04:05,560 Speaker 2: No, So we have a we have a buy rating 71 00:04:05,600 --> 00:04:08,400 Speaker 2: on SAIA. We had a buy rating on Old Dominion 72 00:04:08,440 --> 00:04:11,800 Speaker 2: for most of last year. We downgraded Old Dominion from 73 00:04:11,800 --> 00:04:14,440 Speaker 2: buy to hold back at the end of November, right 74 00:04:14,480 --> 00:04:18,480 Speaker 2: after Thanksgiving one because the stock had already rallied so hard, 75 00:04:18,520 --> 00:04:20,880 Speaker 2: and so it was just really hard for us to 76 00:04:21,920 --> 00:04:24,400 Speaker 2: justify a buy rating based on, you know, what we 77 00:04:24,400 --> 00:04:26,400 Speaker 2: thought earnings would look like over the next couple of years, 78 00:04:26,440 --> 00:04:28,680 Speaker 2: based on what you know, the multiple should be at 79 00:04:28,680 --> 00:04:31,440 Speaker 2: that point where you capitalizers earnings at And so yeah, 80 00:04:31,440 --> 00:04:33,160 Speaker 2: we have a we have a buy rating on SIA, 81 00:04:33,200 --> 00:04:34,840 Speaker 2: but a whold rating on Old Dominion. 82 00:04:34,720 --> 00:04:36,480 Speaker 1: Right, And I think it's pretty interesting if we stay 83 00:04:36,520 --> 00:04:39,000 Speaker 1: on the subject of the lesson truckload market or the 84 00:04:39,120 --> 00:04:42,400 Speaker 1: lt L market. You know, what's been really interesting since 85 00:04:42,800 --> 00:04:45,080 Speaker 1: this summer, this past summer is that one of the 86 00:04:45,240 --> 00:04:49,000 Speaker 1: largest LTL carriers, Yellow went out of business. Can you 87 00:04:49,720 --> 00:04:52,680 Speaker 1: kind of talk about why that is kind of driving 88 00:04:52,720 --> 00:04:55,800 Speaker 1: some of your maybe your bullish comments on SIA. 89 00:04:55,440 --> 00:04:59,080 Speaker 2: Well so so so so what Yellow Corporation was the 90 00:04:59,080 --> 00:05:02,640 Speaker 2: third largest lt company in the country. It as a 91 00:05:02,720 --> 00:05:06,560 Speaker 2: company that has many, many decades long experience. In fact, 92 00:05:06,839 --> 00:05:09,920 Speaker 2: Saya used to be a subsidiarior of Yellow and came 93 00:05:09,960 --> 00:05:12,359 Speaker 2: out of Yellow, you know, twenty years ago. Some people 94 00:05:12,400 --> 00:05:18,599 Speaker 2: forget that, but it's kind of an amazing history. But unfortunately, 95 00:05:18,680 --> 00:05:21,040 Speaker 2: you know, Yellow has been kind of in the market 96 00:05:21,080 --> 00:05:23,200 Speaker 2: with one hand tied behind its back for the last 97 00:05:23,240 --> 00:05:27,000 Speaker 2: fifteen years, after really the price war of twenty nine 98 00:05:27,000 --> 00:05:31,520 Speaker 2: and twenty ten, and so, you know, basically, ultimately, this 99 00:05:31,520 --> 00:05:33,520 Speaker 2: this freight recession we've been in over the last couple 100 00:05:33,520 --> 00:05:37,440 Speaker 2: of years caused the companies earnings and triapments to decline, 101 00:05:37,480 --> 00:05:42,440 Speaker 2: and ultimately, when combined with the union negotiation, was too 102 00:05:42,480 --> 00:05:47,200 Speaker 2: difficult to bear. So Yellow went bankrupt. Its assets were 103 00:05:47,240 --> 00:05:50,680 Speaker 2: liquidated or are in the process of being liquidated. This 104 00:05:50,760 --> 00:05:54,120 Speaker 2: is Yellow did about fifty thousand shipments per day. So 105 00:05:54,200 --> 00:05:58,240 Speaker 2: think of it as you know, almost two saya's going away, 106 00:05:59,040 --> 00:06:02,600 Speaker 2: an ODFL going away, and XPL going away. It's kind 107 00:06:02,640 --> 00:06:05,599 Speaker 2: of that similar scale and size in terms of shipment levels. 108 00:06:05,680 --> 00:06:08,080 Speaker 2: So those shipments had to find new homes, had to 109 00:06:08,120 --> 00:06:12,640 Speaker 2: find new carriers, and that was highly disruptive, particularly during 110 00:06:12,680 --> 00:06:16,600 Speaker 2: the third quarter, and so that gave carriers pricing opportunities, 111 00:06:16,600 --> 00:06:19,400 Speaker 2: It gave other carriers market share opportunities, which ultimately will 112 00:06:19,400 --> 00:06:21,880 Speaker 2: hopefully lead to pricing opportunities, and so yeah, it was 113 00:06:21,920 --> 00:06:24,600 Speaker 2: a very disruptive environment. I think the desk that dust 114 00:06:24,640 --> 00:06:27,599 Speaker 2: has kind of settled now. We're still in a weak 115 00:06:27,720 --> 00:06:32,880 Speaker 2: freight environment generally so but but broadly speaking, it gave 116 00:06:32,960 --> 00:06:36,800 Speaker 2: the LTL companies essentially a free freight recession. What I 117 00:06:36,800 --> 00:06:38,919 Speaker 2: mean by that is that you didn't typically see the 118 00:06:39,000 --> 00:06:41,920 Speaker 2: trough from the peak. You saw peaks going to new 119 00:06:41,960 --> 00:06:44,920 Speaker 2: peaks because of the pricing opportunities, and that really bodes 120 00:06:44,960 --> 00:06:47,080 Speaker 2: well for outlook for all LTL companies over the next 121 00:06:47,080 --> 00:06:49,240 Speaker 2: couple of years. I mean, we talk about if there 122 00:06:49,320 --> 00:06:52,520 Speaker 2: is a broad freight recovery. At some point there inevitably 123 00:06:52,560 --> 00:06:55,080 Speaker 2: will be there. We could debate about when that happens 124 00:06:55,360 --> 00:06:57,800 Speaker 2: or there's uncertainty around that, but there will be one. 125 00:06:58,000 --> 00:07:00,320 Speaker 2: And when that happens, you know, these LTL company, these 126 00:07:00,520 --> 00:07:03,640 Speaker 2: their earnings power are going to increase dramatically, which is 127 00:07:03,640 --> 00:07:06,760 Speaker 2: why they traded such nosebleed valuations today. The market is 128 00:07:06,760 --> 00:07:11,160 Speaker 2: efficient over time and it's really signaling what these companies 129 00:07:11,240 --> 00:07:13,960 Speaker 2: earning capacity could be like over the next two three 130 00:07:14,040 --> 00:07:16,680 Speaker 2: years under a scenario of a broader freight recovery. 131 00:07:18,320 --> 00:07:21,000 Speaker 1: Right in a couple of those L tailer carriage you mentioned, 132 00:07:21,000 --> 00:07:24,920 Speaker 1: they announced, you know, contract renewals were up high single 133 00:07:24,920 --> 00:07:28,240 Speaker 1: digits in the quarter, So that's you know, you're talking 134 00:07:28,280 --> 00:07:31,160 Speaker 1: about pricing power. It's something very interesting because you know, 135 00:07:31,160 --> 00:07:34,120 Speaker 1: when you look at the truckload market, they don't have 136 00:07:34,320 --> 00:07:37,000 Speaker 1: any pricing power. But you know, one of the interesting 137 00:07:37,040 --> 00:07:39,680 Speaker 1: things I think about Saya, you know, it's, as you 138 00:07:39,840 --> 00:07:42,360 Speaker 1: kind of alluded to it, it's a growth story still 139 00:07:42,400 --> 00:07:46,040 Speaker 1: because they did not necessarily have a national footprint, and 140 00:07:46,320 --> 00:07:48,880 Speaker 1: you know, Yellow is kind of the bankruptcy of Yellow 141 00:07:48,920 --> 00:07:52,360 Speaker 1: is providing them an opportunity to kind of accelerate their 142 00:07:52,400 --> 00:07:55,920 Speaker 1: growth story to getting a national footprint. Do you have 143 00:07:55,960 --> 00:07:57,440 Speaker 1: any thoughts on when do you think they're going to 144 00:07:57,480 --> 00:07:57,840 Speaker 1: get there? 145 00:07:57,920 --> 00:08:00,120 Speaker 2: Well, I mean they already are there right now. I 146 00:08:00,120 --> 00:08:02,720 Speaker 2: mean they've got a little under two hundred terminals across 147 00:08:02,760 --> 00:08:06,560 Speaker 2: the country. I would say that having a national network 148 00:08:06,560 --> 00:08:09,640 Speaker 2: and having an optimal national network or two different things. 149 00:08:09,720 --> 00:08:11,560 Speaker 2: And so I think what they're trying to do, to 150 00:08:11,600 --> 00:08:14,560 Speaker 2: your pointly is they have a national network and that 151 00:08:14,760 --> 00:08:17,640 Speaker 2: was a lot of their Northeast expansion and their organic growth, 152 00:08:17,760 --> 00:08:20,480 Speaker 2: and now they're in the luxurious position to say, Okay, 153 00:08:20,520 --> 00:08:22,760 Speaker 2: we have a national network, but how do we optimize that? 154 00:08:22,840 --> 00:08:24,480 Speaker 2: How do we fill in the holes that we have 155 00:08:25,280 --> 00:08:29,760 Speaker 2: to basically optimize where we are from a network density perspective, 156 00:08:29,840 --> 00:08:32,760 Speaker 2: from a pricing perspective, And let me be very clear 157 00:08:32,800 --> 00:08:36,160 Speaker 2: about this, So we talk about pricing in the LTL industry. 158 00:08:36,320 --> 00:08:40,360 Speaker 2: You know, we have data over ten years of data 159 00:08:40,400 --> 00:08:44,160 Speaker 2: that tells me that customers of LTL carriers care way 160 00:08:44,160 --> 00:08:46,840 Speaker 2: more about service than they do about price. I mean, 161 00:08:46,960 --> 00:08:49,200 Speaker 2: you know, service might be number one, prices like number 162 00:08:49,280 --> 00:08:53,000 Speaker 2: fifteen on the list of rankings, and while it's important 163 00:08:53,000 --> 00:08:55,480 Speaker 2: to have competitive price at the end of the day. 164 00:08:55,520 --> 00:08:57,880 Speaker 2: You can really differentiate yourself by having good service. So 165 00:08:58,160 --> 00:09:00,240 Speaker 2: let me just say that Saya has been in seeing 166 00:09:00,240 --> 00:09:03,160 Speaker 2: in their service for the last ten years. Yes, the 167 00:09:03,240 --> 00:09:07,000 Speaker 2: Yellow bankruptcy allowed it to accelerate its performance. But like 168 00:09:07,080 --> 00:09:10,839 Speaker 2: anything in life, you know, what happens is when opportunity 169 00:09:10,920 --> 00:09:14,200 Speaker 2: meets timing or luck, and that's when magic happens. And 170 00:09:14,240 --> 00:09:15,760 Speaker 2: so I think I think SiO is at the right 171 00:09:15,800 --> 00:09:16,800 Speaker 2: place at the right time. 172 00:09:17,679 --> 00:09:18,920 Speaker 3: It it was. 173 00:09:19,080 --> 00:09:20,559 Speaker 2: It was done a lot of the heavy lifting, a 174 00:09:20,559 --> 00:09:22,520 Speaker 2: lot of the hard work, and then Yellow happened to 175 00:09:22,520 --> 00:09:24,480 Speaker 2: come along. But I think SiO would be on the 176 00:09:24,480 --> 00:09:27,160 Speaker 2: current path that's on even without Yellow, I don't. I 177 00:09:27,200 --> 00:09:29,559 Speaker 2: think Yellow just accelerated that to your exact point. 178 00:09:29,400 --> 00:09:31,800 Speaker 3: Ly right right. 179 00:09:31,840 --> 00:09:33,800 Speaker 1: And they're going to have to like outsource some of 180 00:09:33,840 --> 00:09:35,640 Speaker 1: the pickup. You know that before they may in might 181 00:09:35,679 --> 00:09:38,160 Speaker 1: have outsourced pickup and delivery in certain locations, and this 182 00:09:38,200 --> 00:09:40,160 Speaker 1: is going to allow them to bring kind of more. 183 00:09:40,160 --> 00:09:43,360 Speaker 2: Ye or handover or handover, you know, do cartage or 184 00:09:43,360 --> 00:09:46,439 Speaker 2: handover in regions that they don't they You know, one thing, 185 00:09:46,440 --> 00:09:48,600 Speaker 2: when you do when you have a national account and 186 00:09:48,640 --> 00:09:52,280 Speaker 2: you don't have a fully densified national network, you have 187 00:09:52,360 --> 00:09:54,839 Speaker 2: to take pricing discounts because you have to hand off 188 00:09:54,880 --> 00:09:58,480 Speaker 2: that freight to a a competitor or or or you 189 00:09:58,480 --> 00:10:00,040 Speaker 2: know in a certain region where you don't have that 190 00:10:00,160 --> 00:10:02,679 Speaker 2: great coverage, and that's what they can address. And then 191 00:10:02,720 --> 00:10:04,360 Speaker 2: the other thing is is that you know people don't 192 00:10:04,360 --> 00:10:06,640 Speaker 2: realize is that when you have claims ratio that's very 193 00:10:06,720 --> 00:10:10,520 Speaker 2: very low, you can charge insurance on your on your palettes, 194 00:10:10,720 --> 00:10:13,480 Speaker 2: and that insurance if you have very clo image show 195 00:10:13,520 --> 00:10:15,800 Speaker 2: drops directly to the bottom line that insurance premium. So 196 00:10:15,960 --> 00:10:19,840 Speaker 2: there's a lot of benefits debt network centric financial benefits 197 00:10:19,840 --> 00:10:22,920 Speaker 2: that come from a robust national network, But with that 198 00:10:22,960 --> 00:10:25,680 Speaker 2: also comes risks. You can't go from two hundred to 199 00:10:25,679 --> 00:10:29,120 Speaker 2: two hundred and sixty terminals without some level of execution 200 00:10:29,200 --> 00:10:32,600 Speaker 2: rescue structure the Winehole network. You got to think about 201 00:10:32,640 --> 00:10:35,040 Speaker 2: the people you bring on and the culture of service 202 00:10:35,120 --> 00:10:38,280 Speaker 2: that those people knew people bring to the business. So 203 00:10:38,440 --> 00:10:41,240 Speaker 2: this is not easy by any means. It's incredibly hard. 204 00:10:41,280 --> 00:10:43,439 Speaker 2: I like to say that, you know, as somebody that 205 00:10:43,920 --> 00:10:47,840 Speaker 2: lives and breeds the LTL network, at least analytically, I've 206 00:10:47,960 --> 00:10:51,800 Speaker 2: never seen a more operating intensive business, more complicated business 207 00:10:51,960 --> 00:10:54,040 Speaker 2: when you're operating inside of It's very easy for all 208 00:10:54,080 --> 00:10:56,040 Speaker 2: of us to look at waight per shipment and yield 209 00:10:56,120 --> 00:10:58,000 Speaker 2: and length the ball and blah blah blah. But at 210 00:10:58,000 --> 00:10:59,600 Speaker 2: the end of the day, this is an incredibly hard 211 00:10:59,600 --> 00:11:01,600 Speaker 2: thing to do. And so that's why I think Saia, 212 00:11:02,120 --> 00:11:04,600 Speaker 2: the fact that they've been able to grow their business, 213 00:11:04,880 --> 00:11:08,800 Speaker 2: you know, grow their shipment count and raise prices and 214 00:11:08,960 --> 00:11:12,960 Speaker 2: raise margins that through those three things together are very 215 00:11:13,080 --> 00:11:15,440 Speaker 2: very difficult to do. I think they're the only company 216 00:11:15,480 --> 00:11:18,840 Speaker 2: in LTL that's actually been able to meaningfully, you know, 217 00:11:18,920 --> 00:11:21,640 Speaker 2: take market share and actually improve their margins. And that's 218 00:11:21,640 --> 00:11:23,080 Speaker 2: why we're so bullish on the stock. 219 00:11:24,760 --> 00:11:24,960 Speaker 3: Right. 220 00:11:25,120 --> 00:11:28,559 Speaker 1: And just to plug the podcast, so if for those 221 00:11:28,640 --> 00:11:31,280 Speaker 1: listening today, you could go back and listen to a 222 00:11:31,280 --> 00:11:36,359 Speaker 1: conversation we have with the CEO of SIA, Fritz hold Graph, 223 00:11:36,559 --> 00:11:40,040 Speaker 1: which is available on all the podcast channels that are 224 00:11:40,080 --> 00:11:44,120 Speaker 1: out there. So just switching gears a little bit. So, 225 00:11:44,440 --> 00:11:47,480 Speaker 1: you know, we've talked about Zia, you know, had some 226 00:11:47,559 --> 00:11:52,760 Speaker 1: great growth at stock is super outperformed the broader markets 227 00:11:52,760 --> 00:11:56,880 Speaker 1: in some areas that most people considered our high growth areas. 228 00:11:57,280 --> 00:11:59,120 Speaker 1: So you know, I know, part of your job is 229 00:11:59,160 --> 00:12:02,080 Speaker 1: to find you know, what the next SIA is for 230 00:12:02,280 --> 00:12:08,160 Speaker 1: investors that uh, you know, for your Georgia Bank investors customers. 231 00:12:08,200 --> 00:12:12,760 Speaker 1: So can you where is the next growth area that 232 00:12:12,800 --> 00:12:15,160 Speaker 1: you're looking for? What is the next name that you 233 00:12:15,240 --> 00:12:17,840 Speaker 1: think has a lot of opportunity for a significant upside? 234 00:12:18,080 --> 00:12:20,120 Speaker 2: Yeah, sure so so so listen, I think there's a 235 00:12:20,160 --> 00:12:22,240 Speaker 2: couple of ways in which you can look at this industry. 236 00:12:22,320 --> 00:12:26,319 Speaker 2: The transportation one is through a very cyclical transactional lens. 237 00:12:26,559 --> 00:12:29,240 Speaker 2: Where's the freight market if has improved, you know, uh 238 00:12:29,880 --> 00:12:31,680 Speaker 2: blah blah blah. Like at the end of the day, 239 00:12:31,760 --> 00:12:33,679 Speaker 2: you know, we think this is going to be a 240 00:12:33,679 --> 00:12:37,280 Speaker 2: cycle beneficiary. But what's what's so interesting to me and 241 00:12:37,600 --> 00:12:39,640 Speaker 2: my team and what we love to do, is like 242 00:12:39,960 --> 00:12:42,319 Speaker 2: where are the compounders going to be? Like, where is 243 00:12:42,360 --> 00:12:45,120 Speaker 2: there an opportunity for earnings power to double or triple 244 00:12:45,200 --> 00:12:47,560 Speaker 2: or quadruple and and and and and there's not a 245 00:12:47,559 --> 00:12:50,040 Speaker 2: lot of that because it's it's a mature industry. It's 246 00:12:50,040 --> 00:12:53,320 Speaker 2: a trillion dollar industry in terms of revenue, and and 247 00:12:53,360 --> 00:12:55,480 Speaker 2: a lot of these companies are over one hundred years old, 248 00:12:55,720 --> 00:12:59,000 Speaker 2: and so it's not really that simple to figure figure 249 00:12:59,040 --> 00:13:01,920 Speaker 2: that out. And so I wouldn't. It's really hard to 250 00:13:02,000 --> 00:13:05,280 Speaker 2: find the next Saia because Saya has been so such 251 00:13:05,360 --> 00:13:07,600 Speaker 2: a monster, if I could put it that way. But 252 00:13:07,640 --> 00:13:10,640 Speaker 2: there are companies that we think can be secular winners 253 00:13:10,880 --> 00:13:15,600 Speaker 2: cyclical debate turning into secular conversations, and so one company 254 00:13:15,679 --> 00:13:19,120 Speaker 2: is JB Hunts And listen, we haven't been positive on 255 00:13:19,240 --> 00:13:21,439 Speaker 2: JB Hunt for a long time, you know. We there 256 00:13:21,520 --> 00:13:23,880 Speaker 2: was a time that we had a celebrating on JB Hunt. 257 00:13:24,400 --> 00:13:28,360 Speaker 2: And as we've gotten smarter about the opportunity that jab 258 00:13:28,480 --> 00:13:33,720 Speaker 2: hunt provides and the value added competitive advantage it has, 259 00:13:34,000 --> 00:13:36,000 Speaker 2: we've gotten smarter and as a result, we've gotten more 260 00:13:36,040 --> 00:13:39,280 Speaker 2: bullish on the company. And so Jbhunt today moves about 261 00:13:39,320 --> 00:13:42,959 Speaker 2: two million intermotial loads per year. We think that over 262 00:13:43,040 --> 00:13:45,440 Speaker 2: the next two three four years that could be three 263 00:13:45,520 --> 00:13:48,560 Speaker 2: million intermotial loads a year, so fifty percent increase in 264 00:13:48,600 --> 00:13:51,360 Speaker 2: the loads. And we think the company has a huge 265 00:13:51,360 --> 00:13:54,160 Speaker 2: competitive advantage in terms of the asset bases, has the 266 00:13:54,240 --> 00:13:57,400 Speaker 2: relationship with the NSF that it has, the variable cost 267 00:13:57,400 --> 00:14:00,480 Speaker 2: structure that it has. So we are really really about 268 00:14:00,559 --> 00:14:02,720 Speaker 2: JB Hunt in terms of what the next two to 269 00:14:02,720 --> 00:14:05,240 Speaker 2: three year opportunity could be and when you compare jbhunt 270 00:14:05,360 --> 00:14:07,880 Speaker 2: to its competitors in terms of hub Group or Schneider 271 00:14:08,080 --> 00:14:11,040 Speaker 2: or swift In or modal, you see that they've massively 272 00:14:11,040 --> 00:14:14,319 Speaker 2: outperformed in terms of resiliency of profits and we think 273 00:14:14,360 --> 00:14:18,600 Speaker 2: that reflects their their variability and their purchase transportation as 274 00:14:18,600 --> 00:14:22,240 Speaker 2: a relationship their evergreen contract with BNSF. So jbhunt may 275 00:14:22,240 --> 00:14:24,720 Speaker 2: not be the next Saya. Hard to see that stack 276 00:14:24,800 --> 00:14:27,560 Speaker 2: of seven hundred percent over the next five years, but 277 00:14:27,600 --> 00:14:30,200 Speaker 2: it could certainly be Sia's little brother in terms of 278 00:14:30,240 --> 00:14:33,200 Speaker 2: the outperformance that it could generate over the next two years. 279 00:14:33,320 --> 00:14:35,680 Speaker 2: The other company, and this is a little bit controversial, 280 00:14:35,960 --> 00:14:40,920 Speaker 2: is UPS. So UPS we believe the labor deal that 281 00:14:40,960 --> 00:14:43,320 Speaker 2: they signed in the middle of last year will be 282 00:14:43,360 --> 00:14:45,600 Speaker 2: a long term positive for the company. Now, I have 283 00:14:45,640 --> 00:14:48,400 Speaker 2: been bullish on UPS for the last eighteen months and 284 00:14:48,480 --> 00:14:52,040 Speaker 2: last year was a disaster, So I am not you know, 285 00:14:52,360 --> 00:14:54,080 Speaker 2: I'm not. I have a lot of egg on my 286 00:14:54,160 --> 00:14:57,360 Speaker 2: face with respect to UPS and recommending that company. But 287 00:14:57,360 --> 00:15:02,360 Speaker 2: the intrinsic drivers for why we are UPS are completely intact, 288 00:15:02,720 --> 00:15:06,120 Speaker 2: meaning that the cost curve massively comes down starting in 289 00:15:06,120 --> 00:15:09,040 Speaker 2: the middle of this year and stays that low cost 290 00:15:09,080 --> 00:15:11,680 Speaker 2: inflation stays with the company for the next several years, 291 00:15:11,720 --> 00:15:13,920 Speaker 2: really till the end of twenty twenty six. So UPS 292 00:15:14,000 --> 00:15:16,760 Speaker 2: is a company where you know exactly what happened last year. 293 00:15:16,840 --> 00:15:21,760 Speaker 2: Volumes bad, costs bad, So both sides of the P 294 00:15:21,920 --> 00:15:25,000 Speaker 2: and L were bad, and that had a compounding effect 295 00:15:25,040 --> 00:15:27,360 Speaker 2: on the profits of the company. We think that the 296 00:15:27,400 --> 00:15:29,760 Speaker 2: next three or four years can be a mirror image 297 00:15:29,800 --> 00:15:32,160 Speaker 2: of that, because what happens is you have some cyclical 298 00:15:32,200 --> 00:15:35,320 Speaker 2: recovery and volumes and then you have this cost inflation 299 00:15:35,400 --> 00:15:38,280 Speaker 2: that comes back down and moderates basically next to nothing. 300 00:15:38,600 --> 00:15:41,680 Speaker 2: And so Jbehind and UPS are two companies that we 301 00:15:41,760 --> 00:15:44,920 Speaker 2: think are really interesting debates outside of hey, what do 302 00:15:44,920 --> 00:15:46,560 Speaker 2: you want to buy if the cycle moves up in 303 00:15:46,600 --> 00:15:47,160 Speaker 2: the next couple of. 304 00:15:47,120 --> 00:15:50,640 Speaker 1: Months, right, And I think the UPS is pretty interesting. 305 00:15:50,640 --> 00:15:53,080 Speaker 1: On the earnings call, you know, I know you were 306 00:15:53,160 --> 00:15:56,800 Speaker 1: on it and you win. Carol to May and she's 307 00:15:57,240 --> 00:15:59,280 Speaker 1: been CEO for a couple of years now. She's really 308 00:15:59,280 --> 00:16:01,480 Speaker 1: taken a hard look at some of the businesses that 309 00:16:01,600 --> 00:16:04,400 Speaker 1: UPS is in. She decided that, you know, the less 310 00:16:04,400 --> 00:16:07,120 Speaker 1: than truckload business was not a good fit for them, 311 00:16:07,200 --> 00:16:09,800 Speaker 1: and you know when they divested that and sold that 312 00:16:09,880 --> 00:16:12,640 Speaker 1: to TFI. I think a lot of people were surprised 313 00:16:12,640 --> 00:16:15,280 Speaker 1: from this so of the financials of how how poorly 314 00:16:15,440 --> 00:16:16,080 Speaker 1: run it was. 315 00:16:16,640 --> 00:16:16,920 Speaker 3: Uh. 316 00:16:16,960 --> 00:16:19,800 Speaker 1: And now there's talk of a strategic review for the 317 00:16:19,880 --> 00:16:22,600 Speaker 1: brokerage business. Do you have an opinion about like it 318 00:16:22,640 --> 00:16:24,880 Speaker 1: is that and that positive if they get rid of it? Uh? 319 00:16:25,240 --> 00:16:26,000 Speaker 3: Do you do? 320 00:16:26,000 --> 00:16:27,680 Speaker 1: Do you think it's it's a good business to have 321 00:16:27,720 --> 00:16:31,200 Speaker 1: because obviously they lean on that business during peak season 322 00:16:31,200 --> 00:16:33,960 Speaker 1: when they're looking for linehull moves, so they do get 323 00:16:33,960 --> 00:16:35,560 Speaker 1: some benefit from having that in house. 324 00:16:35,640 --> 00:16:37,120 Speaker 3: I just wonder what's your thoughts on that. 325 00:16:37,280 --> 00:16:39,800 Speaker 2: I think first and foremost, you know, UPS is a 326 00:16:39,800 --> 00:16:43,720 Speaker 2: partial company, uh and an airlift company. That's the vast 327 00:16:43,760 --> 00:16:47,200 Speaker 2: majority of their of their profit pool. And so do 328 00:16:47,240 --> 00:16:49,680 Speaker 2: I like that they sold the LTL business, you know, 329 00:16:49,840 --> 00:16:52,520 Speaker 2: a year and a half before the biggest uh, one 330 00:16:52,520 --> 00:16:54,920 Speaker 2: of the biggest the bull runs in LTL. 331 00:16:55,080 --> 00:16:55,240 Speaker 3: You know. 332 00:16:55,320 --> 00:16:56,680 Speaker 2: But but obviously we don't have a time machine, we 333 00:16:56,720 --> 00:16:58,840 Speaker 2: don't have a crystal ball, So no, I don't think so, 334 00:16:58,960 --> 00:17:00,760 Speaker 2: I mean they sold it, I think the TFI for 335 00:17:01,000 --> 00:17:04,040 Speaker 2: eight hundred million bucks, and obviously TFI now is trying 336 00:17:04,040 --> 00:17:05,520 Speaker 2: to turn around the business. And I agree with you 337 00:17:05,560 --> 00:17:08,000 Speaker 2: what's amazing when you talk to TFI. We covered TFI. 338 00:17:08,320 --> 00:17:11,840 Speaker 2: When you talk to TFI, it's pretty incredible. How how 339 00:17:11,960 --> 00:17:14,360 Speaker 2: much would to chop there is in terms of improving 340 00:17:14,359 --> 00:17:17,200 Speaker 2: that business. And I think that in LTL land, when 341 00:17:17,240 --> 00:17:20,879 Speaker 2: you never hear most LTL pretty much all LTL companies 342 00:17:20,920 --> 00:17:23,320 Speaker 2: except for where I can think of one, never talks 343 00:17:23,359 --> 00:17:25,719 Speaker 2: about free cash flow because a lot of that operaty 344 00:17:25,760 --> 00:17:29,000 Speaker 2: cash flow has to be reinvested to buy new equipment, 345 00:17:29,560 --> 00:17:32,760 Speaker 2: a new terminals and which is basically proxies for service. 346 00:17:33,119 --> 00:17:34,600 Speaker 2: And so at the end of the day, it seems 347 00:17:34,640 --> 00:17:39,840 Speaker 2: like UPS wasn't focused on the LTL business, and so 348 00:17:39,920 --> 00:17:42,280 Speaker 2: as a result, there was just too much capital and 349 00:17:42,480 --> 00:17:45,399 Speaker 2: lift requirements and that would be a distraction away from 350 00:17:45,400 --> 00:17:47,680 Speaker 2: the partial business. So I think strategically it made sense. 351 00:17:48,040 --> 00:17:50,639 Speaker 2: Timing was tough, but of course at that time it 352 00:17:50,720 --> 00:17:53,520 Speaker 2: was a difficult. I would say Coyote is similar. You know, 353 00:17:53,600 --> 00:17:56,280 Speaker 2: Coyote is not a core business. I would say that 354 00:17:56,520 --> 00:17:59,119 Speaker 2: the two core businesses obviously are three. Core business of 355 00:17:59,200 --> 00:18:01,760 Speaker 2: UPS is the partial business, like I said, the air 356 00:18:01,800 --> 00:18:05,760 Speaker 2: freight business, the ext international express business, and then obviously healthcare. 357 00:18:06,080 --> 00:18:09,400 Speaker 2: You know, people don't really realize this, but UVS has 358 00:18:09,400 --> 00:18:13,679 Speaker 2: a ten billion dollar healthcare business, healthcare logistics business. So 359 00:18:13,960 --> 00:18:16,520 Speaker 2: I think this is all about Carol's strategy. How do 360 00:18:16,560 --> 00:18:20,439 Speaker 2: we focus the business on what really matters for the 361 00:18:20,520 --> 00:18:24,119 Speaker 2: core operations. And yeah, I don't love, you know, selling 362 00:18:24,160 --> 00:18:30,639 Speaker 2: Coyote when we've seen the brokerage results. They're very difficult structurally. 363 00:18:30,640 --> 00:18:33,760 Speaker 2: The most difficult time. You shouldn't say structurally, cyclically, the 364 00:18:33,760 --> 00:18:37,720 Speaker 2: most difficult time is tough timing. But I think it 365 00:18:37,840 --> 00:18:42,359 Speaker 2: shows her, you know, willingness to basically not be distracted 366 00:18:42,359 --> 00:18:45,320 Speaker 2: by the civicality, just focus on what matters and listen. 367 00:18:45,440 --> 00:18:48,200 Speaker 2: Carol has had a tough run over the last couple 368 00:18:48,200 --> 00:18:51,159 Speaker 2: of years, and so I have a tremendous amount of 369 00:18:51,160 --> 00:18:54,640 Speaker 2: respect for obviously, but it's been tough for UPS over 370 00:18:54,680 --> 00:18:57,600 Speaker 2: the last one, you know, eighteen months or so. I'm 371 00:18:57,640 --> 00:19:00,600 Speaker 2: hoping that the company gets its mojo back a little 372 00:19:00,640 --> 00:19:03,680 Speaker 2: bit because cyclically things get better and hopefully the cost 373 00:19:03,760 --> 00:19:07,040 Speaker 2: inflation gets digested. But yeah, I mean, I hope that 374 00:19:07,119 --> 00:19:09,239 Speaker 2: answers your question. Ly, I don't love the timing of it, 375 00:19:09,359 --> 00:19:11,800 Speaker 2: but I totally understand it from what matters and what's 376 00:19:11,880 --> 00:19:12,640 Speaker 2: core to the business. 377 00:19:12,960 --> 00:19:14,920 Speaker 3: Sure, and just for listeners out there. 378 00:19:14,960 --> 00:19:17,159 Speaker 1: So healthcare logistics is a good business to be in 379 00:19:17,160 --> 00:19:20,280 Speaker 1: because it tends to higher margins than regular logistics because 380 00:19:20,640 --> 00:19:22,119 Speaker 1: of you know, a lot of it has to be 381 00:19:22,160 --> 00:19:25,280 Speaker 1: temperature controlled, there's a lot of security involved, so there's 382 00:19:25,280 --> 00:19:27,800 Speaker 1: a lot of value added that a logistics provider is 383 00:19:27,840 --> 00:19:31,760 Speaker 1: doing for the shipper. So that's it's a great business, 384 00:19:31,840 --> 00:19:34,440 Speaker 1: and that's a business one of the reasons why UPS 385 00:19:34,520 --> 00:19:36,200 Speaker 1: is so focused on that business. 386 00:19:36,600 --> 00:19:36,719 Speaker 3: Uh. 387 00:19:36,920 --> 00:19:38,640 Speaker 1: And then just going back, you know some of your 388 00:19:38,640 --> 00:19:42,679 Speaker 1: comments about the lesson truckload market, the LTL market, about 389 00:19:42,680 --> 00:19:44,679 Speaker 1: how acid and intensive it is. You know, that's one 390 00:19:44,680 --> 00:19:48,040 Speaker 1: of the reasons why it's so hard for new entrants 391 00:19:48,080 --> 00:19:50,120 Speaker 1: to get into the market. You know, if we look 392 00:19:50,119 --> 00:19:53,680 Speaker 1: at the truckload market, there's really low barriers to entry. 393 00:19:53,960 --> 00:19:56,480 Speaker 1: Anyone can really become a truckload carrier. You just need 394 00:19:56,480 --> 00:19:59,320 Speaker 1: a CDL, a couple thousand dollars in your pocket and 395 00:19:59,359 --> 00:20:02,119 Speaker 1: you're good to go with all the appsits you can 396 00:20:02,160 --> 00:20:05,360 Speaker 1: have at your fingertips to find loads. So it's it's 397 00:20:05,400 --> 00:20:08,840 Speaker 1: it's a pretty interesting, much more consolidated market, the LTL market, 398 00:20:09,000 --> 00:20:11,199 Speaker 1: where the top ten have you know, I don't know 399 00:20:11,200 --> 00:20:12,760 Speaker 1: what the number is now than a yellow is com 400 00:20:12,840 --> 00:20:15,080 Speaker 1: but sixty five to seventy two percent of the market, 401 00:20:15,240 --> 00:20:19,640 Speaker 1: So it's it's a much more consolidated market and there 402 00:20:19,680 --> 00:20:20,520 Speaker 1: for better pricing. 403 00:20:20,960 --> 00:20:23,639 Speaker 2: Yeah, Lee, that's a that's a great that's a great point. 404 00:20:23,720 --> 00:20:26,159 Speaker 2: And you know I should have mentioned that. You're absolutely right, Like, 405 00:20:26,400 --> 00:20:29,640 Speaker 2: if you and I wanted to start a truckload business, 406 00:20:29,960 --> 00:20:32,200 Speaker 2: we need to check for five thousand dollars and tomorrow 407 00:20:32,200 --> 00:20:34,280 Speaker 2: we're in the in the market, and we're no different 408 00:20:34,440 --> 00:20:36,600 Speaker 2: than ninety five percent of the other players in the market. 409 00:20:36,720 --> 00:20:39,320 Speaker 2: Now there are four million tractor trailers fifty three foot 410 00:20:39,320 --> 00:20:42,200 Speaker 2: trailer tractor trailers on the road, and ninety five percent 411 00:20:42,200 --> 00:20:44,200 Speaker 2: of them are in the hands of people with fewer 412 00:20:44,240 --> 00:20:49,359 Speaker 2: than for four units versus the LTL industry. Your point, 413 00:20:49,440 --> 00:20:51,320 Speaker 2: if you and I want to open up an LTL company, 414 00:20:51,480 --> 00:20:54,200 Speaker 2: we need about you know, five to ten billion dollars 415 00:20:54,240 --> 00:20:57,000 Speaker 2: in capital before the first dollar of revenue comes in. 416 00:20:57,160 --> 00:20:58,960 Speaker 2: So there is a if you you have to build 417 00:20:58,960 --> 00:21:02,040 Speaker 2: it before anything comes it's very very difficult. And the 418 00:21:02,480 --> 00:21:04,480 Speaker 2: bearersh entry, I think your point. I should have mentioned 419 00:21:04,520 --> 00:21:07,040 Speaker 2: that right up front. But that is exactly why lt 420 00:21:07,240 --> 00:21:09,000 Speaker 2: L has created the values creating right. 421 00:21:09,040 --> 00:21:10,400 Speaker 1: And the good news is if we want to start 422 00:21:10,400 --> 00:21:12,440 Speaker 1: an LTL market, I did really good on my Super 423 00:21:12,480 --> 00:21:17,080 Speaker 1: Bowl pool, so maybe maybe we can start one. So so, 424 00:21:17,400 --> 00:21:19,840 Speaker 1: you know, you talked about you know, JB. Hunt and 425 00:21:20,160 --> 00:21:22,600 Speaker 1: for those that don't know, you know exactly what JB 426 00:21:22,680 --> 00:21:25,520 Speaker 1: Hunt do, Uh, just f y I. It's ticker JB 427 00:21:25,760 --> 00:21:29,320 Speaker 1: h T. You know, they have multiple businesses. Not only 428 00:21:29,320 --> 00:21:32,240 Speaker 1: are they an intermotile provider, they have a brokerage business, 429 00:21:32,240 --> 00:21:35,639 Speaker 1: a dedicated business, a final mile business, uh, and a 430 00:21:35,680 --> 00:21:38,840 Speaker 1: truckload business. So you know that they are a truly 431 00:21:38,880 --> 00:21:43,920 Speaker 1: diversified transportation provider. You know what what another company that's 432 00:21:44,040 --> 00:21:48,760 Speaker 1: that's becoming more and more diversified is Night Swift. Do 433 00:21:48,840 --> 00:21:50,639 Speaker 1: you do you have an opinion one way or the 434 00:21:50,720 --> 00:21:53,760 Speaker 1: other on Night on the stock k n X. 435 00:21:54,880 --> 00:21:57,840 Speaker 2: Of course, yeah. My job is to have opinions, so 436 00:21:58,400 --> 00:22:02,399 Speaker 2: I absolutely have an opinion. You know, well, Night's a 437 00:22:02,480 --> 00:22:06,600 Speaker 2: great It's hard to say, like I believe that Kevin 438 00:22:06,680 --> 00:22:09,840 Speaker 2: Knight and Dave Jackson and Adam Miller, you know, the 439 00:22:09,840 --> 00:22:14,920 Speaker 2: the chairman, CEO and CFO of Knight respectively, all all 440 00:22:14,920 --> 00:22:18,520 Speaker 2: have a really great framework when they allocate capital. And 441 00:22:18,560 --> 00:22:21,280 Speaker 2: that's really really important, right when you think about returns 442 00:22:21,280 --> 00:22:25,439 Speaker 2: on invested capital. Ultimately, that's where multiples and valuation and 443 00:22:25,600 --> 00:22:29,160 Speaker 2: equity values really reflect ultimately the inputs from a return 444 00:22:29,200 --> 00:22:32,840 Speaker 2: on vestic capital perspective. So I believe that Night management 445 00:22:32,840 --> 00:22:36,240 Speaker 2: team is one of the best at that. But but 446 00:22:36,280 --> 00:22:38,040 Speaker 2: the problem is, you know, you can have the best 447 00:22:38,040 --> 00:22:41,000 Speaker 2: house in the world, but if that house is located 448 00:22:41,040 --> 00:22:44,600 Speaker 2: in a very undesirable neighborhood from a cyclicality, from a 449 00:22:44,600 --> 00:22:48,240 Speaker 2: bear's entry perspective, then it's very very difficult to to 450 00:22:48,400 --> 00:22:51,520 Speaker 2: create to to raise the value of that house, right 451 00:22:51,560 --> 00:22:53,119 Speaker 2: And and so I think what they've been trying to 452 00:22:53,160 --> 00:22:57,520 Speaker 2: do is, you know, step into this multi modal kind 453 00:22:57,520 --> 00:23:01,800 Speaker 2: of environment where less revenue, less profits are coming from 454 00:23:02,040 --> 00:23:06,600 Speaker 2: the most cyclically uh cyclical areas, which is truckload. But 455 00:23:06,920 --> 00:23:09,360 Speaker 2: they're not there yet. You know, there's a lot more 456 00:23:10,040 --> 00:23:12,560 Speaker 2: to go to be able to say that, you know, 457 00:23:12,640 --> 00:23:15,679 Speaker 2: this is the company that should reflect that that that 458 00:23:15,760 --> 00:23:18,959 Speaker 2: strategic direction. And I'll give you a perfect example. You know, 459 00:23:19,200 --> 00:23:22,480 Speaker 2: if you think about trough to trough, So the last 460 00:23:22,520 --> 00:23:25,960 Speaker 2: trough in the freight market was twenty nineteen, the current 461 00:23:26,000 --> 00:23:29,679 Speaker 2: trough hopefully was twenty twenty three. We'll see. But if 462 00:23:29,720 --> 00:23:33,120 Speaker 2: you look at twenty nineteen to twenty twenty three, Sia's 463 00:23:33,160 --> 00:23:35,679 Speaker 2: earnings trough on trough troft to trough was up over 464 00:23:35,720 --> 00:23:38,960 Speaker 2: two hundred percent. Old Dominions was up over one hundred percent. 465 00:23:39,040 --> 00:23:41,719 Speaker 2: JB Hunts was up over forty percent. So these are 466 00:23:41,760 --> 00:23:46,119 Speaker 2: companies that are creating value cycle over cycle. Nights were down, 467 00:23:46,480 --> 00:23:49,320 Speaker 2: Night's earnings were down. EPs was down. And so I 468 00:23:49,320 --> 00:23:51,320 Speaker 2: think I think that you know, to the extent that 469 00:23:51,359 --> 00:23:54,320 Speaker 2: they tip their toes in LTL, it's very hard to 470 00:23:54,359 --> 00:23:56,640 Speaker 2: build an LTL business. And so I would have said 471 00:23:56,840 --> 00:24:00,000 Speaker 2: two three years ago, whenever they first bought Triple A Cooper, 472 00:24:00,359 --> 00:24:02,080 Speaker 2: I think if you would ask them where they would 473 00:24:02,080 --> 00:24:04,480 Speaker 2: be now, they probably would have felt that they would 474 00:24:04,520 --> 00:24:08,080 Speaker 2: have gotten more done, is my judgment. And but it's 475 00:24:08,080 --> 00:24:10,600 Speaker 2: really hard. It's it's really hard to find people to 476 00:24:10,720 --> 00:24:13,320 Speaker 2: sell to you, and and and and and I think 477 00:24:13,520 --> 00:24:17,760 Speaker 2: I think that you know, Knight is a great place 478 00:24:17,800 --> 00:24:20,560 Speaker 2: to sell into because they'll make sure the legacy of 479 00:24:20,560 --> 00:24:23,560 Speaker 2: that business continues, like MMME or Triple A for example, 480 00:24:23,600 --> 00:24:25,520 Speaker 2: if it's the same people that run it, et cetera, 481 00:24:25,520 --> 00:24:27,480 Speaker 2: et cetera, and they put Reid Ross on the board 482 00:24:27,520 --> 00:24:29,760 Speaker 2: who is the head of ACT. But yeah, I mean 483 00:24:29,880 --> 00:24:31,640 Speaker 2: I think they just need a lot more to go. Now. 484 00:24:31,800 --> 00:24:35,440 Speaker 2: We have had a vicious truckload cycle. I mean vicious, 485 00:24:35,640 --> 00:24:38,320 Speaker 2: and so I think I think that that that volatility 486 00:24:38,400 --> 00:24:40,680 Speaker 2: or that bust that's happened over the last year has 487 00:24:40,720 --> 00:24:44,840 Speaker 2: basically overwhelmed any any any improvement they've seen in diversification 488 00:24:44,880 --> 00:24:46,880 Speaker 2: of their profit pools. And so I think there's more 489 00:24:47,000 --> 00:24:49,920 Speaker 2: more to do there. And obviously with the US Express 490 00:24:50,119 --> 00:24:52,679 Speaker 2: even though that's a great acquisition and Knight had to 491 00:24:52,680 --> 00:24:55,119 Speaker 2: do that acquisition, you know, Knight could not have not 492 00:24:55,400 --> 00:24:57,919 Speaker 2: passed on that in my judgment, Uh, you know, it 493 00:24:58,000 --> 00:24:59,719 Speaker 2: just makes it even harder than to diversit. 494 00:25:00,440 --> 00:25:04,000 Speaker 1: And then also, like you know, the less diversified you 495 00:25:04,080 --> 00:25:07,320 Speaker 1: are as a truckload carrier, the more of just a 496 00:25:07,400 --> 00:25:09,520 Speaker 1: trading vehicle your stock becomes. 497 00:25:10,080 --> 00:25:11,000 Speaker 3: Do you look at it that. 498 00:25:10,960 --> 00:25:14,239 Speaker 1: Way where you're just trading around the cycle versus like 499 00:25:14,320 --> 00:25:16,200 Speaker 1: the buy and hold and keeping it forever. 500 00:25:17,160 --> 00:25:21,960 Speaker 2: First and foremost, I think that you know, whether you 501 00:25:22,000 --> 00:25:24,160 Speaker 2: know you have a low market cap or a high 502 00:25:24,200 --> 00:25:27,440 Speaker 2: market cap or investor, you know, you attract a certain 503 00:25:27,480 --> 00:25:30,159 Speaker 2: type of investor versus that all stuff is like on 504 00:25:30,200 --> 00:25:32,880 Speaker 2: the margin noise. In my opinion, it's really about what 505 00:25:32,920 --> 00:25:36,040 Speaker 2: type of intrinsic value you're creating cycle over cycle, and so, 506 00:25:36,119 --> 00:25:39,359 Speaker 2: like I said, you know, Night's earnings EPs was down 507 00:25:39,640 --> 00:25:42,760 Speaker 2: from twenty nineteen to twenty twenty three, SIAS were up 508 00:25:42,800 --> 00:25:45,320 Speaker 2: over two hundred percent, which is why when you see 509 00:25:45,359 --> 00:25:49,240 Speaker 2: the holder list for SIA, it's dominated by very large 510 00:25:49,320 --> 00:25:52,240 Speaker 2: long only investors, and for Night it's the It's not 511 00:25:52,359 --> 00:25:54,600 Speaker 2: that way. And so I think I think, you know 512 00:25:55,040 --> 00:25:59,920 Speaker 2: that that could be achieved through I would say compounding earning, 513 00:26:00,520 --> 00:26:03,240 Speaker 2: and I think Knight has a full you know, we'll 514 00:26:03,240 --> 00:26:06,840 Speaker 2: get there. I believe Knight will get there, and and 515 00:26:06,840 --> 00:26:08,560 Speaker 2: and you know, this is not a manager team that 516 00:26:08,640 --> 00:26:12,080 Speaker 2: lacks ambition. The CEO and CFO are very young. They 517 00:26:12,119 --> 00:26:14,600 Speaker 2: want they want to leave their mark on the industry 518 00:26:14,720 --> 00:26:17,159 Speaker 2: and the company, and so I wholeheartedly believe they're going 519 00:26:17,240 --> 00:26:19,880 Speaker 2: to get there, which is not at the place yet 520 00:26:19,920 --> 00:26:22,840 Speaker 2: where the market's willing to give them credit for what 521 00:26:22,880 --> 00:26:25,440 Speaker 2: they've done so far, especially because of the volatility of 522 00:26:25,480 --> 00:26:26,160 Speaker 2: the trucklerd market. 523 00:26:26,240 --> 00:26:28,600 Speaker 1: Right, and it's hard to bit against the Knight's management 524 00:26:28,640 --> 00:26:32,520 Speaker 1: team the success that they've had integrating swift. It looks 525 00:26:32,520 --> 00:26:35,240 Speaker 1: like they're you know, in early innings of success with 526 00:26:35,920 --> 00:26:39,880 Speaker 1: US Express. You know they just have a super track 527 00:26:40,000 --> 00:26:43,480 Speaker 1: rate of just turning around poorly managed businesses. 528 00:26:44,400 --> 00:26:46,159 Speaker 2: Well, yeah, I mean that's that's why I said they 529 00:26:46,200 --> 00:26:48,600 Speaker 2: had to buy U US Express. I mean, these these 530 00:26:48,640 --> 00:26:51,640 Speaker 2: types of assets don't come along. You know, they're they're 531 00:26:51,680 --> 00:26:55,159 Speaker 2: tightly controlled, they're family owned, and when you get something 532 00:26:55,200 --> 00:26:57,800 Speaker 2: of this scale, you kind of have to do it. 533 00:26:57,960 --> 00:27:00,560 Speaker 2: And I get it because because what would what the 534 00:27:00,600 --> 00:27:04,399 Speaker 2: management teams are really focused on is how much return 535 00:27:04,440 --> 00:27:07,080 Speaker 2: they're getting on the capitol that they're employing. And the 536 00:27:07,119 --> 00:27:09,200 Speaker 2: stock market and the investors are going to do whatever 537 00:27:09,240 --> 00:27:11,119 Speaker 2: it's going to do, but we have to focus on 538 00:27:11,200 --> 00:27:13,720 Speaker 2: the returns on the capital that we employ. And the 539 00:27:13,840 --> 00:27:18,280 Speaker 2: US Express opportunity was so meaningful and at such scale 540 00:27:18,640 --> 00:27:21,280 Speaker 2: that you couldn't and then they don't come along very often, 541 00:27:21,480 --> 00:27:23,119 Speaker 2: that it was really something that they had to do, 542 00:27:23,200 --> 00:27:25,719 Speaker 2: in my opinion, and and and you're right, I think 543 00:27:25,720 --> 00:27:28,000 Speaker 2: they've done a tremendous job. I mean, I believe US 544 00:27:28,080 --> 00:27:33,240 Speaker 2: Express is profitable at an operating profit level today and 545 00:27:33,600 --> 00:27:37,479 Speaker 2: so they're on their way. And I believe that Knight's 546 00:27:37,960 --> 00:27:40,159 Speaker 2: stock has bottomed here. I have a by rating on 547 00:27:40,560 --> 00:27:43,520 Speaker 2: night Stock in the load to mid fifties. You know, 548 00:27:43,560 --> 00:27:46,560 Speaker 2: I believe that if we get any any even inkling 549 00:27:46,600 --> 00:27:48,680 Speaker 2: of a freight recovery, whether it comes in March, April 550 00:27:48,760 --> 00:27:50,920 Speaker 2: or May, when the seasonally stronger period, you know, Knight's 551 00:27:50,920 --> 00:27:52,760 Speaker 2: going to have a six handle on of stock. But 552 00:27:52,760 --> 00:27:54,600 Speaker 2: but I want to be very clear, this is a 553 00:27:54,680 --> 00:27:57,760 Speaker 2: freight momentum stock at the moment. You know, it's a 554 00:27:57,800 --> 00:28:02,320 Speaker 2: freight momentum stock, and even railroads probably are freight momentum stock. Uh. 555 00:28:02,359 --> 00:28:06,920 Speaker 2: It is not a compounder yet. I think there's hope 556 00:28:06,920 --> 00:28:08,920 Speaker 2: that they may be able to get there, but maybe 557 00:28:08,920 --> 00:28:10,400 Speaker 2: one or two deals away from right. 558 00:28:10,440 --> 00:28:13,040 Speaker 1: Well, we were talking about US Express and you know, 559 00:28:13,080 --> 00:28:17,480 Speaker 1: before night brought them, they're kind of operations of business 560 00:28:17,520 --> 00:28:19,639 Speaker 1: with somewhat of a train wreck and and kind of 561 00:28:19,680 --> 00:28:23,479 Speaker 1: on that same theme, can we talk about Norfolk Southern? 562 00:28:24,440 --> 00:28:27,159 Speaker 1: That's probably a poorly worded pun, but uh, you know 563 00:28:27,200 --> 00:28:31,920 Speaker 1: ticker n SC Uh. They've had a lot of struggles, uh, 564 00:28:32,040 --> 00:28:35,560 Speaker 1: you know following a uh you know, a derailment uh 565 00:28:35,960 --> 00:28:41,480 Speaker 1: in in Pennsylvaria opens at Ohio where they had the derailment. Yeah, 566 00:28:42,280 --> 00:28:44,400 Speaker 1: and you know, they've been kind of fighting against that, 567 00:28:44,600 --> 00:28:47,040 Speaker 1: and now they've had some you know, rumors in the 568 00:28:47,080 --> 00:28:51,000 Speaker 1: Wall Street Journal about some activism activity. What are your 569 00:28:51,040 --> 00:28:52,760 Speaker 1: thoughts on Norfolk Southern. 570 00:28:53,400 --> 00:28:55,800 Speaker 2: So let's just talk about the facts and then I 571 00:28:55,800 --> 00:28:58,080 Speaker 2: can talk about, you know, what I think. But the 572 00:28:58,120 --> 00:29:01,040 Speaker 2: facts are that you know there. You know, if you 573 00:29:01,080 --> 00:29:03,200 Speaker 2: look at the most recent results on the fourth quarter, 574 00:29:04,360 --> 00:29:07,320 Speaker 2: the company that had the best margin was Canadian Pacific 575 00:29:07,640 --> 00:29:10,120 Speaker 2: and the company that had the worst margin was Norfolk Southern. 576 00:29:10,640 --> 00:29:13,960 Speaker 2: And the gap that separated those two was one thousand 577 00:29:14,000 --> 00:29:17,840 Speaker 2: basis points or ten percentage points, so kind of a 578 00:29:17,920 --> 00:29:22,040 Speaker 2: high low thirties versus low forties operating margin. That is 579 00:29:22,320 --> 00:29:25,960 Speaker 2: as wide as a gap that's existed in as long 580 00:29:26,000 --> 00:29:28,040 Speaker 2: as I can remember. You have to go back several 581 00:29:28,160 --> 00:29:31,520 Speaker 2: years to see a gap that wide. And so CP 582 00:29:31,720 --> 00:29:34,800 Speaker 2: should have higher margins than Norfolk Southern. They shouldn't have 583 00:29:34,800 --> 00:29:37,480 Speaker 2: a thousand basis points higher margins. And if you look 584 00:29:37,520 --> 00:29:40,840 Speaker 2: at if you look at CSX, you know, at the 585 00:29:40,920 --> 00:29:44,440 Speaker 2: end of the day, it's about a five hundred basis 586 00:29:44,440 --> 00:29:46,560 Speaker 2: point margin gap. And you can think about Norfolk Southern 587 00:29:46,640 --> 00:29:49,640 Speaker 2: versus CSX. There's a little bit of mixed differentiture intermodel, 588 00:29:49,680 --> 00:29:53,720 Speaker 2: but essentially they're very similar companies and operate in similar geographies. 589 00:29:53,920 --> 00:29:56,640 Speaker 2: And so I would expect the five hundred basis points 590 00:29:57,040 --> 00:30:00,360 Speaker 2: of difference between Norfolk and CSX to be to be 591 00:30:00,560 --> 00:30:03,600 Speaker 2: to be notable and for people to talk about that 592 00:30:03,680 --> 00:30:06,840 Speaker 2: and criticize that, and you know, just to give people 593 00:30:06,880 --> 00:30:10,360 Speaker 2: a sense, five hundred basis points on a twelve billion 594 00:30:10,400 --> 00:30:13,959 Speaker 2: dollar revenue basis six hundred million dollars of profits, you 595 00:30:14,000 --> 00:30:17,800 Speaker 2: capitalize that at you know, you know, that's over ten 596 00:30:17,920 --> 00:30:21,280 Speaker 2: billion of equity value that essentially being left on the table. 597 00:30:22,040 --> 00:30:28,360 Speaker 2: You could argue because of an operational you know, operational tempo, 598 00:30:28,440 --> 00:30:30,640 Speaker 2: that's not where it needs to be. So I think 599 00:30:30,640 --> 00:30:33,479 Speaker 2: that I think that that is those are the facts 600 00:30:33,480 --> 00:30:36,680 Speaker 2: and those are the numbers, and so yeah, I think 601 00:30:36,680 --> 00:30:39,320 Speaker 2: it's as we've said in our research notes, I think 602 00:30:39,400 --> 00:30:41,600 Speaker 2: way all the way back in December and January that 603 00:30:42,200 --> 00:30:44,840 Speaker 2: in fact, we published a top ten list the first 604 00:30:45,080 --> 00:30:47,920 Speaker 2: working day of January, and one of the top ten 605 00:30:48,240 --> 00:30:51,160 Speaker 2: things that we wrote at that time was, if Norfolk 606 00:30:51,200 --> 00:30:55,160 Speaker 2: doesn't improve their operating performance in any meaningful way this year, 607 00:30:56,080 --> 00:30:58,600 Speaker 2: there's going to be pressure. And so I am not 608 00:30:58,720 --> 00:31:01,200 Speaker 2: at all We're not all surprised, because when you look 609 00:31:01,200 --> 00:31:04,800 Speaker 2: at the fourth quarter, the company did publish a three 610 00:31:04,880 --> 00:31:07,480 Speaker 2: year target of improving their operating ratio by one hundred 611 00:31:07,480 --> 00:31:09,560 Speaker 2: to one hundred and fifty basis points were one to 612 00:31:09,600 --> 00:31:12,719 Speaker 2: one and a half percent every year. The problem is 613 00:31:12,720 --> 00:31:15,000 Speaker 2: is that every railroad probably has that target as well, 614 00:31:15,200 --> 00:31:18,000 Speaker 2: and so they're not that goal is not actually lowering 615 00:31:18,040 --> 00:31:20,680 Speaker 2: the gap. So I think, you know, I know the 616 00:31:20,680 --> 00:31:23,880 Speaker 2: Norfolk management team incredibly well. I think they're really really 617 00:31:23,920 --> 00:31:26,239 Speaker 2: trying to do the right thing, and I believe with 618 00:31:26,360 --> 00:31:29,320 Speaker 2: every pode in my body that they responded to the 619 00:31:29,320 --> 00:31:32,880 Speaker 2: East Palatine thing perfectly. You looked at the NTSP report, 620 00:31:33,080 --> 00:31:35,880 Speaker 2: I think it was perfect. What they did was really 621 00:31:35,920 --> 00:31:38,920 Speaker 2: really good in terms of dealing with that, with that 622 00:31:39,040 --> 00:31:41,880 Speaker 2: disaster that could have happened to any railroad. I mean, 623 00:31:41,920 --> 00:31:45,840 Speaker 2: people forget, you know, the positive Chain Control PTC regulation 624 00:31:45,960 --> 00:31:49,480 Speaker 2: came fourteen days after a Union Pacific develment, you know, 625 00:31:49,520 --> 00:31:51,360 Speaker 2: and the fact that that we are over a year 626 00:31:51,480 --> 00:31:53,680 Speaker 2: or about a year removed from that, and there's really 627 00:31:53,760 --> 00:31:56,800 Speaker 2: been no real legislation. You know, the facts matter in 628 00:31:56,840 --> 00:31:58,440 Speaker 2: this case, and I think Norfolk still on and handled 629 00:31:58,440 --> 00:32:01,719 Speaker 2: themselves extremely well and and and I think the regulatory 630 00:32:01,760 --> 00:32:04,280 Speaker 2: reports also say that. But yeah, I mean I would 631 00:32:04,280 --> 00:32:07,840 Speaker 2: say that there is a lot more needed to fix 632 00:32:07,920 --> 00:32:11,320 Speaker 2: the operating tempet of the business. And and you know 633 00:32:11,560 --> 00:32:14,800 Speaker 2: that that's really the reason we're seeing these headlines at 634 00:32:14,840 --> 00:32:16,040 Speaker 2: the tape essentially. 635 00:32:15,760 --> 00:32:17,960 Speaker 1: Right, And in your opinion, is that because they haven't 636 00:32:18,040 --> 00:32:20,760 Speaker 1: like leaned into ps R. They've kind of like, you know, 637 00:32:21,200 --> 00:32:25,520 Speaker 1: they implement some PSR within and sorry, psr's. 638 00:32:25,040 --> 00:32:26,400 Speaker 3: Precision is scheduling railroading. 639 00:32:27,600 --> 00:32:32,760 Speaker 1: You know, it's an operating philosophy that's done on most 640 00:32:32,760 --> 00:32:35,000 Speaker 1: of the rails now and for those out there, it's 641 00:32:35,040 --> 00:32:37,400 Speaker 1: kind of like six sigma for the railroads, just really 642 00:32:37,680 --> 00:32:41,800 Speaker 1: looking at costs and asset utilization and trying to maximize 643 00:32:42,520 --> 00:32:44,800 Speaker 1: you know, utilization of those assets. 644 00:32:45,120 --> 00:32:47,040 Speaker 3: So sorry about that. So we've got to digress. 645 00:32:47,680 --> 00:32:50,080 Speaker 1: So do you think it's it's because they haven't you know, 646 00:32:50,120 --> 00:32:51,640 Speaker 1: fully leaned into two PSR. 647 00:32:52,080 --> 00:32:56,520 Speaker 2: Well, PSR, you know, is not a thing that you are. 648 00:32:56,760 --> 00:32:59,040 Speaker 2: It's really a thing that you do. Like I like 649 00:32:59,080 --> 00:33:02,000 Speaker 2: to say, it's not an a verb. You know you 650 00:33:02,440 --> 00:33:05,520 Speaker 2: are you are you are doing it every day, Therefore 651 00:33:05,600 --> 00:33:08,479 Speaker 2: you are When you stop doing it every day, you 652 00:33:08,560 --> 00:33:11,520 Speaker 2: stop becoming that so PSR to your I think you 653 00:33:11,840 --> 00:33:13,640 Speaker 2: explained it beautifull lee. At the end of the day, 654 00:33:13,920 --> 00:33:17,160 Speaker 2: it's a very fancy term or kind of a quote 655 00:33:17,200 --> 00:33:20,880 Speaker 2: unquote sophisticated term for just managing an asset intensive business 656 00:33:20,920 --> 00:33:23,440 Speaker 2: the way it's supposed to manage be managed, which is 657 00:33:23,440 --> 00:33:26,360 Speaker 2: to optimize the efficiency of the assets that you employ. 658 00:33:27,000 --> 00:33:30,240 Speaker 2: And so when you think about a railroad, it's it's 659 00:33:30,280 --> 00:33:32,840 Speaker 2: a fight every day. You know, it's an outdoor sport. 660 00:33:33,080 --> 00:33:35,560 Speaker 2: So every railroad has a morning call whatever seven seven 661 00:33:35,640 --> 00:33:39,000 Speaker 2: thirty in the morning, and every district or every region 662 00:33:39,160 --> 00:33:41,880 Speaker 2: has to row in the same direction. If that if 663 00:33:41,880 --> 00:33:44,920 Speaker 2: that train doesn't leave Chicago on time, it doesn't get 664 00:33:44,960 --> 00:33:46,920 Speaker 2: to Atlanta on time. If it doesn't leave Atlanta, doesn't 665 00:33:46,920 --> 00:33:49,400 Speaker 2: get to New York on time. And so every part 666 00:33:49,480 --> 00:33:53,960 Speaker 2: of that network has to operate appropriately and on time 667 00:33:54,480 --> 00:33:56,520 Speaker 2: for there not to be problems down the line, this 668 00:33:56,680 --> 00:34:00,320 Speaker 2: butterfly effect that we call it. And so a well 669 00:34:00,400 --> 00:34:03,600 Speaker 2: run PSR rail is not set it and forget it. 670 00:34:03,600 --> 00:34:07,720 Speaker 2: It is every single day doing PSR and then you 671 00:34:07,840 --> 00:34:10,600 Speaker 2: become a PSR rail. That's what we've seen at Union 672 00:34:10,640 --> 00:34:13,239 Speaker 2: Pacific under Jim Venna and and all the rest of 673 00:34:13,280 --> 00:34:16,400 Speaker 2: the operating team there what what what can happen in 674 00:34:16,440 --> 00:34:19,400 Speaker 2: a short period of time if if the entire organization 675 00:34:19,480 --> 00:34:22,360 Speaker 2: is held accountable to the trip plan. And so for me, 676 00:34:22,480 --> 00:34:26,480 Speaker 2: I think where where Norfolk I mean, failing is too 677 00:34:26,640 --> 00:34:29,280 Speaker 2: harsh of a word, but where I think Norfolk needs 678 00:34:29,320 --> 00:34:33,640 Speaker 2: improvement is holding every part of the trip plan accountable. 679 00:34:34,200 --> 00:34:37,200 Speaker 2: And that and and that history has shown is not 680 00:34:37,280 --> 00:34:39,440 Speaker 2: a lot of people can do. I think, you know, 681 00:34:39,520 --> 00:34:42,520 Speaker 2: there's a few people that come from that Hunter Harrison 682 00:34:42,560 --> 00:34:45,680 Speaker 2: school of thought that that that effectively do that. And 683 00:34:45,719 --> 00:34:49,120 Speaker 2: I think that's why you've seen, you know, this rush 684 00:34:49,239 --> 00:34:52,400 Speaker 2: to intervention, if I could put it that way, external 685 00:34:52,400 --> 00:34:55,360 Speaker 2: intervention in the company, because there is a view that like, 686 00:34:55,440 --> 00:34:57,000 Speaker 2: not a lot of people can do this. It's a 687 00:34:57,040 --> 00:34:58,839 Speaker 2: hard thing to do. If it was easy, everybody would 688 00:34:58,880 --> 00:35:01,080 Speaker 2: do it. And and and and I think PSR is 689 00:35:01,120 --> 00:35:02,719 Speaker 2: a verb, it's not a Now, it's the best way 690 00:35:02,719 --> 00:35:03,120 Speaker 2: I can. 691 00:35:03,040 --> 00:35:04,320 Speaker 3: Frame it, Okay. 692 00:35:04,600 --> 00:35:06,920 Speaker 1: And for those out there Hunter Harrison, he's kind of 693 00:35:06,920 --> 00:35:11,279 Speaker 1: considered the godfather of PSORRY started Illinois Central, moved just 694 00:35:11,320 --> 00:35:14,440 Speaker 1: to Canadian National, and a lot of the railroads today, 695 00:35:15,440 --> 00:35:18,560 Speaker 1: the people that are running the operations or even the 696 00:35:18,600 --> 00:35:23,000 Speaker 1: c suite or the CEO are disciples of Hunter Harrison. 697 00:35:23,120 --> 00:35:28,800 Speaker 1: So he's had a dramatic impact on the industry. You know, 698 00:35:28,880 --> 00:35:33,640 Speaker 1: you mentioned, you know, we were talking about railroads. Is 699 00:35:33,680 --> 00:35:36,279 Speaker 1: there a railroad that you know you like over the 700 00:35:36,320 --> 00:35:38,279 Speaker 1: others from a stock perspective. 701 00:35:38,880 --> 00:35:45,040 Speaker 2: Yeah, absolutely so. And so you know, we in January 702 00:35:45,080 --> 00:35:47,360 Speaker 2: of last year, not to just give out people a 703 00:35:47,360 --> 00:35:49,600 Speaker 2: little bit of contacts. In January of last year, we 704 00:35:49,719 --> 00:35:52,840 Speaker 2: downgraded Union Pacific because of a lot of the operational 705 00:35:52,960 --> 00:35:56,920 Speaker 2: challenges that we just saw were mis execution. And then 706 00:35:56,960 --> 00:36:00,359 Speaker 2: we upgraded it around two hundred and thirteen dollars when 707 00:36:00,440 --> 00:36:03,279 Speaker 2: Jim Benna, you know, was basically going to come in 708 00:36:03,719 --> 00:36:07,000 Speaker 2: and fix the business. And obviously Union Pacific has gone 709 00:36:07,000 --> 00:36:09,319 Speaker 2: from two point thirteen all the way to two hundred 710 00:36:09,360 --> 00:36:11,960 Speaker 2: and forty dollars or even over two hundred and forty dollars. 711 00:36:12,120 --> 00:36:14,400 Speaker 2: And so for us, like Union Pacific for really the 712 00:36:14,480 --> 00:36:16,600 Speaker 2: latter half of last year was the number one railroad 713 00:36:16,600 --> 00:36:20,359 Speaker 2: that we liked because of this opportunity to improve the 714 00:36:20,400 --> 00:36:23,200 Speaker 2: car velocity and the operating metrics will ultimately led to 715 00:36:23,239 --> 00:36:25,920 Speaker 2: better asset turns, which ultimately led to more volume and 716 00:36:25,960 --> 00:36:28,879 Speaker 2: better profits. And so that has kind of played out now. 717 00:36:28,880 --> 00:36:32,600 Speaker 2: I think the Union Pacific still has a very very 718 00:36:32,640 --> 00:36:34,880 Speaker 2: favorable opportunity ahead of it, and we still have a 719 00:36:34,880 --> 00:36:37,040 Speaker 2: by rating on the stock. But we actually wrote a 720 00:36:37,080 --> 00:36:41,120 Speaker 2: note a little over a week ago making Norfolk Southern 721 00:36:41,160 --> 00:36:44,200 Speaker 2: our our top pick, and we actually published a note 722 00:36:44,320 --> 00:36:47,960 Speaker 2: saying why Norfolk Southern is our favorite rail now, And 723 00:36:48,160 --> 00:36:52,080 Speaker 2: that happened before all the activism stuff came out. And 724 00:36:52,120 --> 00:36:54,680 Speaker 2: the reason we did that is because we thought that 725 00:36:54,960 --> 00:36:58,959 Speaker 2: it was the fourth quarter results and the conference call 726 00:36:59,680 --> 00:37:05,160 Speaker 2: were were very difficult, and it became very clear that 727 00:37:05,520 --> 00:37:10,640 Speaker 2: there was an acceleration needed by this management team to 728 00:37:10,760 --> 00:37:14,200 Speaker 2: address some of the concerns that the market legitimately had. 729 00:37:14,640 --> 00:37:17,160 Speaker 2: And so, in our opinion, and we wrote about this 730 00:37:17,200 --> 00:37:19,960 Speaker 2: when we made Norfolk our top blake, we thought that 731 00:37:20,160 --> 00:37:23,280 Speaker 2: it would be inevitable to see improvement in Norfolk Southern 732 00:37:23,560 --> 00:37:25,640 Speaker 2: and we strongly believe that, and we hope that it's 733 00:37:25,640 --> 00:37:29,160 Speaker 2: an existing managing team that makes that change, but it's 734 00:37:29,200 --> 00:37:31,560 Speaker 2: going to happen one another. And what we said in 735 00:37:31,600 --> 00:37:33,600 Speaker 2: our note, actually this is a quote, is that no 736 00:37:33,840 --> 00:37:38,040 Speaker 2: railroad has been allowed to underperform by this much for 737 00:37:38,160 --> 00:37:42,560 Speaker 2: this long without there there being some change change, whether 738 00:37:42,640 --> 00:37:45,799 Speaker 2: internally generated in terms of improvement or external change. And 739 00:37:45,800 --> 00:37:47,719 Speaker 2: then of course a couple of days later, you know, 740 00:37:47,760 --> 00:37:50,840 Speaker 2: the the the activism thing came out and all that stuff. 741 00:37:50,880 --> 00:37:52,840 Speaker 2: But this has been something we've been talking about for me, 742 00:37:53,239 --> 00:37:54,600 Speaker 2: you know, Like I said, we go back to all 743 00:37:54,600 --> 00:37:57,440 Speaker 2: the way to January early January, where we talked about 744 00:37:57,560 --> 00:38:00,200 Speaker 2: the need for Norfolk to improve otherwise there would be pressure. 745 00:38:00,360 --> 00:38:04,759 Speaker 2: So I think that Norfolk Southern has become our favorite 746 00:38:04,960 --> 00:38:08,640 Speaker 2: because we think structurally there's nothing really impeding that business 747 00:38:08,640 --> 00:38:11,600 Speaker 2: for improving margins by at least five hundred basis points 748 00:38:11,600 --> 00:38:13,799 Speaker 2: and an actually even more, and so we think that 749 00:38:13,840 --> 00:38:15,920 Speaker 2: will happen over the course of the next twelve to 750 00:38:15,960 --> 00:38:18,600 Speaker 2: eighteen months. And so yeah, I would say Norfolk has 751 00:38:18,640 --> 00:38:19,600 Speaker 2: become our favorite. 752 00:38:20,880 --> 00:38:23,839 Speaker 1: Okay, And just you know, just as an fyout there, 753 00:38:23,880 --> 00:38:27,880 Speaker 1: Union Pacific and nights Swift, they both made Business Weeks 754 00:38:28,280 --> 00:38:31,360 Speaker 1: list of fifty companies to Watch in twenty twenty four 755 00:38:31,960 --> 00:38:34,840 Speaker 1: that was published earlier earlier this year. 756 00:38:35,880 --> 00:38:36,080 Speaker 3: You know. 757 00:38:36,680 --> 00:38:38,839 Speaker 1: So I just want to like Switch Gears a little 758 00:38:38,840 --> 00:38:40,520 Speaker 1: bit because I know you kind of like earned your 759 00:38:40,560 --> 00:38:41,640 Speaker 1: transportation shops. 760 00:38:42,000 --> 00:38:44,280 Speaker 3: I believe you did. In the marine shipping space. 761 00:38:45,640 --> 00:38:49,920 Speaker 1: You know, obviously that's been a hot topics as of late, 762 00:38:50,040 --> 00:38:52,480 Speaker 1: given what's going on in the Red Sea and the 763 00:38:52,480 --> 00:38:56,319 Speaker 1: Suez Canal. Kind of what are your thoughts. I know 764 00:38:56,520 --> 00:38:59,479 Speaker 1: we all have our crystal balls, mind tended minds, pretty 765 00:38:59,520 --> 00:39:03,120 Speaker 1: cracked and cloudy, but you know, what are you thinking 766 00:39:03,160 --> 00:39:07,680 Speaker 1: about when you're looking at marine shipping the impact from 767 00:39:08,040 --> 00:39:10,440 Speaker 1: the crisis in the Red Sea on rates and what 768 00:39:10,480 --> 00:39:12,239 Speaker 1: that means for the companies that you cover. 769 00:39:12,719 --> 00:39:16,360 Speaker 2: Okay, so yeah, you're right. I started out as a 770 00:39:16,400 --> 00:39:20,120 Speaker 2: maritime shipping analyst. It's my first love, it's my passion. 771 00:39:20,560 --> 00:39:24,439 Speaker 2: It's something I think about all the time. And so yes, 772 00:39:24,520 --> 00:39:27,120 Speaker 2: I mean, when you think about the maritime shipping space, 773 00:39:28,160 --> 00:39:31,359 Speaker 2: there's any different verticals, right, there's dry ball commodities, iron 774 00:39:31,400 --> 00:39:35,080 Speaker 2: ore coal, there's you know, tankers, you're doing refined oil, 775 00:39:35,760 --> 00:39:39,640 Speaker 2: jet fuel, diesel, gasoline, crude oil. And then what you 776 00:39:39,680 --> 00:39:42,520 Speaker 2: asked about, which is container ships and so those are 777 00:39:42,560 --> 00:39:47,319 Speaker 2: those are you know, obviously very important for truckers and 778 00:39:47,400 --> 00:39:49,600 Speaker 2: railroads because the stuff that comes on a big container 779 00:39:49,600 --> 00:39:51,439 Speaker 2: ship to the port of Los Angeles with the port 780 00:39:51,440 --> 00:39:54,320 Speaker 2: of Long Beach or New York or Newark or whatever, 781 00:39:55,040 --> 00:39:58,920 Speaker 2: you know, has to be moved inland via dreage or 782 00:39:59,040 --> 00:40:01,879 Speaker 2: trucking or rail and so so so, so that has 783 00:40:02,000 --> 00:40:04,279 Speaker 2: knock on implications. So one of the most important things 784 00:40:04,320 --> 00:40:06,839 Speaker 2: we look at is port imports. In fact, we even track, 785 00:40:07,160 --> 00:40:09,320 Speaker 2: you know, the number of ships that are leading China 786 00:40:09,360 --> 00:40:12,400 Speaker 2: every day and where they're going as a leading indicator 787 00:40:12,440 --> 00:40:16,560 Speaker 2: hopefully for what the opportunity is for railroads and trucking 788 00:40:16,560 --> 00:40:19,200 Speaker 2: companies to move inland. And so we get it. We 789 00:40:19,239 --> 00:40:20,880 Speaker 2: get it right most of the time, but sometimes we 790 00:40:21,120 --> 00:40:24,520 Speaker 2: get it wrong because the data is not perfect. But 791 00:40:24,600 --> 00:40:27,800 Speaker 2: I would say that the Red Sea stuff hasn't really 792 00:40:28,280 --> 00:40:31,480 Speaker 2: concerned me as it relates to an opportunity for the 793 00:40:31,520 --> 00:40:34,520 Speaker 2: freight companies and so so and and and I've tried 794 00:40:34,560 --> 00:40:36,799 Speaker 2: not to be complacent about this, but keep in mind, 795 00:40:36,840 --> 00:40:40,919 Speaker 2: the sus Canal connects, you know, Asia to Europe and 796 00:40:40,920 --> 00:40:45,040 Speaker 2: and and it's not really a huge route of traffic 797 00:40:45,120 --> 00:40:47,880 Speaker 2: for things that are coming to the west coast of 798 00:40:47,920 --> 00:40:50,440 Speaker 2: the US where the majority of Asian shipments come in. 799 00:40:50,719 --> 00:40:54,120 Speaker 2: And and so that hasn't really Now what's been really 800 00:40:54,160 --> 00:40:59,200 Speaker 2: interesting is that the Panama Canal has restricted massively transit 801 00:40:59,200 --> 00:41:01,880 Speaker 2: times every day. I think it's like almost half basically 802 00:41:01,960 --> 00:41:04,400 Speaker 2: what they typically do or allow in terms of daily 803 00:41:04,440 --> 00:41:07,000 Speaker 2: ship transits. And so if you want to get to 804 00:41:07,040 --> 00:41:11,440 Speaker 2: the United States, now more and more the north the 805 00:41:11,480 --> 00:41:16,279 Speaker 2: west coast of the country is the easier route, and 806 00:41:16,320 --> 00:41:18,640 Speaker 2: that is a really good thing for freight because those 807 00:41:18,680 --> 00:41:19,720 Speaker 2: are long length of halls. 808 00:41:19,760 --> 00:41:19,920 Speaker 3: You know. 809 00:41:20,040 --> 00:41:22,520 Speaker 2: What's interesting is more than sixty percent of the population 810 00:41:22,640 --> 00:41:26,080 Speaker 2: lives east of the Mississippi River, but yet fifty percent 811 00:41:26,160 --> 00:41:28,719 Speaker 2: or fifty five percent of what we import come on 812 00:41:28,760 --> 00:41:31,200 Speaker 2: the west, So it's got to move. That's why Chicago 813 00:41:31,280 --> 00:41:35,040 Speaker 2: and Atlanta and Saint Louis, they're all important East West hubs. 814 00:41:35,080 --> 00:41:36,800 Speaker 2: It's because a lot of that stuff that comes in 815 00:41:36,840 --> 00:41:38,400 Speaker 2: the West Coast has to make its way to the 816 00:41:38,440 --> 00:41:42,840 Speaker 2: East East Coast. So I think that's positive, but we 817 00:41:42,960 --> 00:41:45,080 Speaker 2: forget you know, we're still in a very weak demand 818 00:41:45,160 --> 00:41:48,400 Speaker 2: environment generally speaking. So we have seen West Coast share 819 00:41:49,239 --> 00:41:52,400 Speaker 2: as a percentage of imports move up dramatically. The biggest 820 00:41:52,400 --> 00:41:55,160 Speaker 2: increase really came the middle of last year when the 821 00:41:55,200 --> 00:41:57,680 Speaker 2: West Coast finally signed their labor deal. And now keep 822 00:41:57,680 --> 00:42:00,160 Speaker 2: in mind the East Coast labor you know, the the 823 00:42:00,520 --> 00:42:03,239 Speaker 2: union labor dock workers in the East Coast. There's some 824 00:42:03,320 --> 00:42:06,120 Speaker 2: rumblings there too. So I think that the West coast 825 00:42:06,160 --> 00:42:08,480 Speaker 2: of the United States is going to be a net beneficiary. 826 00:42:09,160 --> 00:42:12,640 Speaker 2: And you hate to see talking about who benefits from 827 00:42:12,640 --> 00:42:16,160 Speaker 2: this disaster, this geopolitical disaster that's happening in the Red Sea. 828 00:42:16,480 --> 00:42:18,960 Speaker 2: But the bottom line is that we think more goods 829 00:42:19,239 --> 00:42:21,640 Speaker 2: will come onto the West coast of the United States. 830 00:42:21,800 --> 00:42:25,120 Speaker 2: We're seeing that in the numbers. We're not seeing it, 831 00:42:25,880 --> 00:42:28,799 Speaker 2: you know, massive improvements, but we're seeing a little bit improvements. 832 00:42:28,880 --> 00:42:31,680 Speaker 2: And that creates opportunities for railroads and truckers, you know, 833 00:42:31,680 --> 00:42:34,359 Speaker 2: in terms of long haul moves from the West coast 834 00:42:34,440 --> 00:42:35,360 Speaker 2: to the middle of the country. 835 00:42:36,600 --> 00:42:39,879 Speaker 1: All right, and and some of those companies that will 836 00:42:39,920 --> 00:42:42,160 Speaker 1: benefit or some of the names that you mentioned earlier, 837 00:42:42,200 --> 00:42:43,359 Speaker 1: like Union Pacific and JB. 838 00:42:43,480 --> 00:42:46,919 Speaker 2: Hunt, well those those are the two direct beneficiaries, right 839 00:42:46,960 --> 00:42:48,720 Speaker 2: So so at the end of the day in BNSF, 840 00:42:48,760 --> 00:42:51,840 Speaker 2: which is obviously not public but but but yes, but 841 00:42:52,000 --> 00:42:55,000 Speaker 2: let's keep in mind, you know, fifty percent of what 842 00:42:55,120 --> 00:42:59,400 Speaker 2: CSX and Norfolk Movers interchanged, and so this idea that 843 00:42:59,440 --> 00:43:05,000 Speaker 2: they wouldn't they are pretty direct beneficiaries, but not immediate beneficiaries. 844 00:43:05,000 --> 00:43:08,000 Speaker 2: But yes, Jbihunt and Union Pacific to your point, and 845 00:43:08,040 --> 00:43:11,280 Speaker 2: then you know, also what's happening in Mexico, what's happening 846 00:43:11,360 --> 00:43:15,000 Speaker 2: in if you look at like, you know, investments in 847 00:43:15,160 --> 00:43:19,520 Speaker 2: US manufacturing capacity over the last you know, six months 848 00:43:19,600 --> 00:43:22,799 Speaker 2: or twelve months, it's literally up into the right And 849 00:43:22,840 --> 00:43:25,000 Speaker 2: so there's this opportunity I think from a near shoring 850 00:43:25,040 --> 00:43:29,319 Speaker 2: perspective to move more for our transportation networks that I 851 00:43:29,320 --> 00:43:32,960 Speaker 2: think is positive too. That's outside of the whole import complex. 852 00:43:32,800 --> 00:43:34,160 Speaker 3: Right, gotcha. 853 00:43:34,320 --> 00:43:37,279 Speaker 1: Well that's great, and you know, I think we're we're 854 00:43:37,280 --> 00:43:39,200 Speaker 1: coming up on the end of our time right now. 855 00:43:39,280 --> 00:43:41,279 Speaker 1: So I'd love to check in with you later on 856 00:43:41,360 --> 00:43:44,000 Speaker 1: this year to see you know, how your picks are 857 00:43:44,080 --> 00:43:46,480 Speaker 1: going later on in twenty twenty four. 858 00:43:46,600 --> 00:43:49,719 Speaker 2: Yeah, Lee, always great and listen, I've heard all your 859 00:43:49,760 --> 00:43:51,719 Speaker 2: podcasts and so I'm a fan and so it's an 860 00:43:51,719 --> 00:43:53,680 Speaker 2: honor for me to be part of it. So thank 861 00:43:53,719 --> 00:43:54,800 Speaker 2: you again for the invitation. 862 00:43:55,760 --> 00:43:58,360 Speaker 1: Thanks, thanks Emmitt, and I want to thank everyone for 863 00:43:58,440 --> 00:44:00,760 Speaker 1: tuning in and if you liked an episode, please subscribe 864 00:44:00,800 --> 00:44:03,360 Speaker 1: and leave a review. We've lined up a number of 865 00:44:03,360 --> 00:44:05,480 Speaker 1: great guests for the podcast, so check back to hear 866 00:44:05,480 --> 00:44:10,120 Speaker 1: conversations with c Suite executives, shippers, regulators, and decision makers 867 00:44:10,120 --> 00:44:12,799 Speaker 1: within the freight transportation markets. Also, if you have any 868 00:44:12,800 --> 00:44:15,040 Speaker 1: ideas for future episodes, please hit me up on the 869 00:44:15,120 --> 00:44:17,960 Speaker 1: terminal or on Twitter at logistics Lee. 870 00:44:18,160 --> 00:44:19,919 Speaker 3: Thanks everyone, and be safe out there.