Former Dominion Freight Lines (NASDAQ: ODFL) has been a long-time winner in the stock market, driving strong profit margins and steady growth in the number of partial loads transport industry. With a wave of manufacturing jobs expected to return to the United States, Old Dominion Freight Lines is expected to take advantage.
In this segment of “The 5” recorded on 23 november, Fool contributors Jeremy Bowman and Jason Hall discuss Old Dominion Freight Line’s outlook on the relocation movement and the company’s other competitive advantages.
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Jason Hall: It’s certainly very “picks and shovels”, but a lot more agile. You don’t think heavy trucks are nimble, but it’s a nimble business.
JÃ©rÃ©my Bowman: Yeah, and I like the irony in that. I was also thinking along the same lines, but yes my choice is Old Dominion Freight Line. It is an LTL operator, so it carries small shipments for a wide range of businesses. I think, for me, that offshoring manufacturing, what that says is that it’s going to be good for the industrial economy. It’ll be good for transportation. We’re bringing supply chains back into the country, so we’re not just talking about goods that go to the end user, but things have to get to the manufacturing plant as well. Whether we’re talking about semiconductors or building materials, chemicals, whatever. These companies are in the process of opening up and Old Dominion has been a great stock to own and it is truly a top notch operator in its segment. In the last quarter, their operating margin was close to 30 percent, which is pretty phenomenal, especially when you think of an industrial company. You don’t normally think of margins like that.
Jason Hall: Trucking and logistics have historically been single-digit operating margins. They are able to generate incredible margins.
JÃ©rÃ©my Bowman: Yes, and I think it’s definitely a company with some competitive advantages. It’s a tough industry to break into. I think they are sensitive to macro factors, so I think this move could definitely be good for them.
Jason hall has no position in any of the stocks mentioned. Jeremy bowman has no position in any of the stocks mentioned. The Motley Fool owns stock and recommends Old Dominion Freight Line. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.