How to invest in trucking without driving?
Trucking is a crucial economic activity in the world since it facilitates the transportation of commodities across very huge distances, thus making supply chains to function. Most people when they hear of the trucking business or the trucking company, may just think of the drivers collectively driving on the roads in an 18-wheeler for many hours but you do not necessarily have to drive a truck in order to invest in the business and make huge profits out of it and this is because the business is very crucial in the transportation of goods across the country. The investment opportunities available in the trucking sector include owning trucks and equipment, investing in the trucking companies or investing in services related to the sector.
That being the case, why invest in the trucking industry?
Trucking is a critical component of the transportation needs of the commerce, but especially important in the U. S. where trucks transport more than 70% of the freight. The industry has been known to work very hard in delivering their services especially during the economic crises because the demand for goods transport cannot be ignored. Several factors make trucking an attractive investment
E-commerce Growth: Due to the growth of e-commerce the demands for transportation and delivery have gone up thus contributing to the growth of the trucking industry.
Infrastructure Investments: Trucking receiving long term growth due to the infrastructure investment that governments are making around the world today.
Supply Chain Modernization: Technologies such as logistics and routes have enhanced efficiency in the market thus making the industry more lucrative.
Consistent Demand: Food and other commodities must be delivered regardless of the economic status of the country which makes this service to enjoy consistent traffic.
Now that we’ve covered why the industry is profitable let’s look at how one can participate in the trucking market without driving a truck.
- Invest in Trucking Stocks
The use of stocks of publicly held trucking companies can be considered as one of the least risky and direct ways of investing in the trucking industry without having to participate personally in the business. These are companies that own a big number of trucks, and they offer hauling, delivery as well as supply chain solutions.
Key Publicly Traded Trucking Companies: Key Publicly Traded Trucking Companies:
B. Hunt Transport Services, Inc. (JBHT): A large Canadian transportation logistics firm that provides several types of services in the transportation industry.
Knight-Swift Transportation Holdings Inc. (KNX): It acts as one of the largest companies in the sector of transportation and logistics services, which offers the opportunity to ship trucks of cargo across the U. S.
Old Dominion Freight Line (ODFL): The term used to describe a company that transports small shipments between terminals by using an LTL carrier that is efficient and profitable.
Werner Enterprises (WERN): An intermodal and dedicated trucking provider shipping supplies essential goods for businesses and residential use.
Purchasing equity in the companies that are directly involved in the trucking business will help investors to effectively stake in the growth of the field without being directly involved in its day to day operations. It is equally imperative that every stock investor carries out a proper evaluation of the company’s operations, prospects and market offering every time an investment is made.
Benefits of Stock Investment:
Liquidity: Common stock shares are relatively quite simple and can be bought and sold in the stock exchange.
Diversification: It is possible for you to invest in several companies so that if one company is not performing well, the other will do well.
Growth Potential: Firms within the trucking industry are favorably placed to experience growth and increased demand for transport facilities in this case economic growth.
Risks:
Market Volatility: The prices of the stocks can equally go high or low depending on the general market index variations, economic signs, indicators and even the company’s performance.
Industry-Specific Challenges: Hazardous factors such as the fluctuations of fuel prices, lack of labor, and change of regulation highly influence the profitability of the companies dealing in the trucking industry.
- Invest in Trucking ETFs
If your interest is more general – in the transportation and logistics industry – then you can buy exchange-traded funds (ETFs) that track the trucking industry. ETFs will help the user avoid risks associated with focusing on one particular company but instead, let purchase stocks in several companies at a go.
Key Transportation ETFs:
iShares U. S. Transportation ETF (IYT): Vehicles are also in this category this ETF is involved in, this has transport related stocks such as major trucking firms.
SPDR S&P Transportation ETF (XTN): A transport ETF comprising airlines, railroads as well as trucking companies. Fully automated vehicles.
First Trust Nasdaq Transportation ETF (FTXR): This fund invests in the transportation sector and therefore it holds equities of transportation related companies meaning it holds the equities of trucking firms.
As compared to individual stocks, diversification is done better in the case of ETFs resulting in minimized risks compared to having many investments in one company. By investing in a transportation ETF, you gain exposure to a broad range of companies involved in freight and logistics.
Benefits of ETFs:
Diversification: Diversifies your investment across different companies hence if some firms underperform, other firms’ performance will minimize their effects on your investment.
Lower Risk: ETFs decrease risk as the investor can diversify with various sectors/ companies within the broader category of transportation.
Liquidity: It is also quite easy to buy and sell such securities in the stock market like individual stocks.
Risks:
Market Fluctuations: ETN price is affected by market factors, and changes in economics and challenges faced by specific sectors of the economy.
Sector-Specific Exposure: Despite the diversification, ETFs targeting transportation can also be exposed to fluctuations in the fuel prices or change in regulation or labor problems in the trucking sector.
- Invest in Trucking Equipment
One of the other ways through which one can participate in the trucking industry without having to drive is through the acquisition of the transport equipment which includes the trucks, trailers and other transportation facilities. This strategy entails purchasing equipment and entering into an agreement whereby the users are charged a fee to use the equipment which is in this case the trucks for the trucking companies or the independent drivers.
How It Works:
Purchase Trucks or Trailers: They purchase equipment straight out and lease them to the motor trucking firms and independent contractors.
Leasing Arrangements: Leases are normally long term contracts and thus you will be assured of a constant income from the rentals.
Maintenance and Depreciation: The maintenance, repair and depreciation which are the direct responsibilities of any owner of the equipment are profitability burdens.
Benefits:
Steady Income: Leasing arrangements can be used to generate stable revenues on a regular and/or habitual basis.
Control Over Assets: You are the owner of the equipment and select which companies or specific drivers you want to lease to thus having control of the investment.
Asset Appreciation: On average, or with regards to a specific market the trucking equipment may remain stagnant or appreciate in value.
Risks:
Depreciation Tariffs: the value of the trucks and trailers decreases over time due to issues of depreciation and they hence generate low returns.
Maintenance Costs: Here, you are under the obligation to make regular maintenance and repair which form part of the capital cost.
Leasing Challenges: Searching for good tenants and having to deal with lease agreements may be quite challenging.
- Invest in Logistics Companies
Transportation management firms have the important responsibility of managing and properly coordinating the flow of transportation especially when it comes to the trucking sector. Purchasing stocks in logistics companies enables one to reap from the progress of the trucking industry but without having to own trucks or other tools of transportation.
Types of Logistics Companies:
Third-Party Logistics Providers (3PLs): These companies provide the overall transportation and supply chain management of companies’ products and goods as well as shipment schedules and routes.
Freight Brokers: The freight brokers work on behalf of shippers and carriers to ensure they transport goods from one business to another and the carriers are in the business of transporting, moving goods from one place to another.
Capitalizing in public transport logistics firms or acquiring growth potential private logistics firms is another strategy of making cash out of transport business as transport services continue being demanded frequently.
Benefits:
Indirect Exposure: You make money from the transportation industry especially the trucking industries without having to worry about owning or operating those bulky vehicles.
Technology Integration: Logistics companies have also incorporated more technologies in their services, for instance the use of artificial intelligence and data analytics to enhance the routes utilized thus being growth opportunities.
Risks:
Competitive Market: Logistics is an intense sector with several companies in the industry to compete for the percentage of the market.
Operational Complexity: Some of the issues that the logistics companies have to grapple with include increases in fuel price, changes in legislation as well as scarcity of labour which can considerably impact on their profits.
- Invest in Trucking Franchises
Trucking franchises also offer a way through which one can establish himself in the trucking business through the use of an already well-established brand. Trucking franchises may include specific areas of transportation, distribution or repair services effectively and this is easily manageable since it comes with a full package from the parent organization.
How It Works:
Franchise Ownership: You acquire the license or rights from a famous trucking company or service provider which means you will be participating in their business model, their reputation and business support.
Franchise Fees: The initial fee is a lump payment made to the franchisor while the royalties are a regular payment made based on sales.
Benefits:
Established Business Model: Here, franchises come in as a better solution since most of the risks involved in establishing a business are eliminated.
Brand Recognition: The selection of a trucking franchise means gaining access to an already recognized brand which makes customers easier to get and increase confidence in the brand.
Operational Support: A franchisee comes into owning a business that has already been developed and is backed up by the parent company through providing all the necessary instructions, hence making it easy to manage the business.
Risks:
Initial Investment: Buying a franchise may call for an initial cost that an individual has to make.
Ongoing Fees: Franchisees will incur royalties on an ongoing basis, which diminishes profit including through costs restraints.
Limited Control: These rules and regulations are controlled by the franchisor and many times there can be very little freedom in terms of decision making for the franchisees.
Conclusion
He said that existent business possibilities within the trucking industry are many; the individual does not have to drive a truck to invest in the industry. Thus, getting acquainted with the world of trucking and logistics, let alone the already mentioned direct investments into stocks and ETFs, owning or investing in the trucking equipment, or entering the trucking and logistics business, one can try to continue the growth that has already seized the essential industry. Despite the risks that are associated with each of these investment options, the future demand of transportation services and growth of online trading makes trucking the right investment opportunity for anyone who would want to widen their investment portfolio. Careful analysis of the market, its potential, risks and rewards is always the major aspect of any investment.
