Following a rally on Wednesday, U.S. market indexes declined on Thursday morning after a stronger-than-expected jobs report, which showed nonfarm payrolls increased by 263,000 in November. CNBC reported economists polled by Dow Jones were anticipating an increase of only 200,000.
The data concerned investors as they were looking for signs that the Federal Reserve could potentially begin slowing down interest rate hikes ahead of its meeting later this month.
The Dow Jones Industrial Average fell 224 points, or 0.7%, while the S&P 500 Index declined 0.8% and the Nasdaq Composite sank 1%.
Further, Treasury yields rose on the back of sliding stock prices.
Among individual sectors, industrial stocks, which have tumbled around 14% year to date, were also trading lower.
Ahead of the holiday season, which will likely see heavy demand for shipping services despite the current economic conditions, investors may be interested in potential opportunities among transportation and logistics companies that qualify for Benjamin Graham’s Lost Formula screen, a Premium GuruFocus feature.
Prior to his death in 1976, the legendary investor who authored "Security Analysis" and "The Intelligent Investor" developed a refined formula that screened for companies with a price-earnings ratio of less than 10 and an equity-to-asset ratio of at least 0.5. The formula got its name from the fact he was unable to publish it before his passing; therefore, it was lost from public knowledge for a time. Since Graham also prioritized a minimum interest coverage of 5 with the companies he invested in, that element was included in the criteria as well.
A backtest of the strategy from 1926 to 1976 showed it would have outperformed the Dow benchmark by approximately twice as much.
The screener found transportation companies that met the criteria as of Dec. 3 included Schneider National Inc. (SNDR, Financial), Hub Group Inc. (HUBG, Financial) and Matson Inc. (MATX, Financial).
Schneider National
Schneider National (SNDR, Financial) has a $4.57 billion market cap; its shares were trading around $25.67 on Friday with a price-earnings ratio of 9.60, a price-book ratio of 1.69, a price-sales ratio of 0.70 and an equity-to-asset ratio of 0.64.
In operation for more than 80 years, the Green Bay, Wisconsin-based company provides truckload, intermodal and logistics services around the world.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings estimates.
The GF Score of 85 out of 100 indicates the company is expected to have good outperformance potential, driven by high ratings for profitability, financial strength, GF Value and momentum as well as middling marks for growth.
In addition, the interest coverage ratio of 65.22 outperforms 87.14% of competitors in the transportation industry.
Of the gurus invested in Schneider, Chuck Royce (Trades, Portfolio) has the largest position with 0.20% of its outstanding shares. Jeremy Grantham (Trades, Portfolio), Hotchkis & Wiley, Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also own the stock.
Hub Group
Hub Group (HUBG, Financial) has a market cap of $2.74 billion; its shares were trading around $82.51 on Friday with a price-earnings ratio of 6.94, a price-book ratio of 7.72, a price-book ratio of 1.81, a price-sales ratio of 0.53 and an equity-to-asset ratio of 0.55.
Headquartered in Oak Brook, Illinois, the company offers a variety of intermodal transportation, logistics and supply chain solutions. It has been in operation for over 50 years.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 92 means the company has high outperformance potential. While Hub Group raked in strong ratings for four of the criteria, the GF Value rank of 6 was more moderate.
The interest coverage ratio of 69.69 also tops 88.09% of other industry players currently.
With 2.58% of outstanding shares, Ken Fisher (Trades, Portfolio) is Hub Group’s largest guru shareholder. Other guru investors are Royce, Simons’ firm, Mairs and Power (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Grantham and Greenblatt.
Matson
Matson (MATX, Financial) has a $2.44 billion market cap; its shares were trading around $64.53 on Friday with a price-earnings ratio of 1.90, a price-book ratio of 1.06, a price-sales ratio of 0.54 and an equity-to-asset ratio of 0.52.
Founded in 1882, the Honolulu-based company provides ocean transportation services to Hawaii, Alaska, Guam, Micronesia, the South Pacific, Japan and China. It also offers a range of intermodal services throughout North America.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
The company also has high outperformance potential on the back of a GF Score of 96. It recorded high ratings for all five criteria.
Further, the interest coverage ratio of 85.95 outperforms aroung 89% of industry peers.
PRIMECAP Management (Trades, Portfolio) is Matson’s largest guru shareholder with 0.89% of its outstanding shares. The stock is also being held by Simons’ firm, Hotchkis & Wiley, Greenblatt, John Hussman (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Royce.
