Independent Variable?

As is true in a mathematical equation, the independent variable drives the value, changes the value of the dependent variables.  Knowing the independent variable, allows you to solve for the value of not only the dependent variables but the value of the overall equation.  We know that through good fundamental research, high quality data, and years of industry experience, we can literally change the value of an equity, a company’s access to capital (debt and equity), ability to merge or acquire, and even a management team or their behavior.  We know that if we do our job well, we become the Independent Variable in a company’s future.

We are Independent.  We do not work for a large commercial bank.  We are not beholden to lending relationships, or our firms investment holdings, or even worse – our firm’s investment bankers.

We are Variable.  Over the last several decades, we have been everything from strongly positive about (buy rated) to strongly negative about (sell rated) almost every single equity in the transportation universe.  We have built our reputation upon have an opinion, being clear about that opinion (i.e., no one ever finishes a conversation with us and says, “I wonder what they really think?”)

Transportation stocks have the reputation for predicting the overall market #dowtransporttheory because the underlying goods flow is heartbeat of the economy.  That goods flow becomes increased (or decreased) levels of asset utilization for asset intensive transportation companies, which becomes increased (or decreased) levels of financial returns, which becomes stock price.  We understand that the stock price performance of transportation companies is only symptomatic of the underlying goods flow.