As the transportation sector goes, so goes the U.S. economy, and that means things are going to get better, Donald Broughton told CNBC Friday.
"Transportation stocks have a reputation for predicting the market, predicting the economy…because they reflect what’s happening with the underlying goods flow," said the senior research analyst at Avondale Partners.
"I look at intermodal volume, I look at chemical volume [and] they’re at or above prerecession highs. That tells me that things are continuing to get better. As long as that weekly data keeps coming out better and better I’ll continue to be bullish," he said.
His sector picks include CSX, Union Pacific and especially Norfolk Southern .
"I love what they’ve done with technology, love what they’ve done with efficiency, love that they’re taking trucks off the road," Broughton said.
"They’re doing a great job of running that railroad."
In the same interview, Jason Seidel, director, Dahlman Rose, said he is cautious in the near term but more bullish in the long term.
"I think investors want to see more than in-line results from the rail industry" in the second quarter, he explained. The railroads have been able to raise prices and take business from the trucking companies, so "I think that long-term story’s intact."
However, his two picks are companies known for ground transportation — FedEx and Con-way .
He particularly likes Con-way, a so-called less-than-truckload company whose trucks carry smaller, consolidated freight loads. After years of being "decimated" by low prices, the sector is starting to get rates higher and "inch forward into greater profitability." He said expects to see "even better second-quarter results from Con-way."
CNBC Data Pages:
Jason Seidl doesn't own shares of NSC, CSX or UNP but Dahlman Rose intends to seek to be a financial advisor or engage in banking services with the companies.
Neither Donald Broughton nor his firm own shares of FDX or CNW.