Jensen: Don't Pass These Truckers By

The market is currently at multiyear highs. The rally was turbocharged last week by the latest actions by the Federal Reserve, which boosted the overall market, especially pushing cyclical and commodity stocks much higher. As a result, finding value is getting much harder than it was a few months ago.

One area of opportunity is in the transports, which have had less than half the performance of the overall market in 2012. If the economy does accelerate from Ben Bernanke's latest largesse, the trucking sector appears to be loaded with bargain stocks. In many cases, these stocks are selling for 20% to 30% of where they were the last time we had a robust economy, before the recession.

Though the sector is vulnerable to rising fuel prices, has substantial debt loads and has the Teamsters union to deal with on occasion, trucking companies have had some success pushing through price hikes, and they do not have exposure to declining coal traffic like the railroads do.

Here are two cheap trucking stocks that could be stars if the economy improves. Arkansas Best (ABFS) provides freight transportation throughout the U.S. The company operates approximately 3,800 tractors and 20,100 trailers

Four reasons ABFS is a good speculative growth play at just over $8 a share:

• It is hard to find a cheaper stock than Arkansas Best. It sells for just 47% of book value and approximately 10% of annual revenues.
• The company is expected to post a small overall loss in 2012, but analysts expect it to bounce back and post $1 in earnings per share on a double-digit revenue increase in 2013.
• The company recently successfully pushed through an almost 7% price hike. In addition, ABFS is selling at less than 4x operating cash flow.
• The stock is selling at the very bottom of its five-year valuation range based on price-to-earnings, price-to-book and price-to-sales ratios. The mean price target of the 10 analysts that cover the stock is slightly above $15. Standard & Poor's has a Buy rating and $20 price target on ABFS.

Swift Transportation (SWFT) operates as a multi-faceted transportation-services company and truckload carrier in North America. The company offers its truckload services through dry van, temperature-controlled, flatbed, and specialized trailers, as well as rail-intermodal services.

Four reasons SWFT is a bargain at just over $8 a share:

• The 15 analysts that cover the stock have a median price target of $12 a share. Targets range between $10 and $16 a share.
• The stock is selling for less than 8x forward earnings and just 3x operating cash flow. The company also has been able to triple OCF over the past three years.
• Analysts expect between 4% and 5% revenue growth for both 2012 and 2013. SWFT sports a five-year projected price/earnings/growth ratio of under 1 (0.56) and the stock is just above the level insiders made new purchases in 2011 and this year.
• The stock has formed nice intermediate technical support around the $8 level (see chart).

Swift Transportation Chart

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