Two transport titans speeded higher in the past three months.
FedEx closed the third quarter nearly 80% higher, its best quarterly gain since 1998. UPS, meanwhile, ended 50% higher in its best quarterly performance since going public in 1999.
The two have benefited from tailwinds that should power gains in the entire transports sector in the final stretch of 2020, said Steve Chiavarone, portfolio manager at Federated Hermes.
"We really like transports here. We think that they're one of the few industry groups that have the ability to [do] well in the stay at home kind of Covid world, but also in an economic recovery world," Chiavarone told CNBC's "Trading Nation" on Wednesday.
He said increased e-commerce should drive business-to-consumer activity, while a pickup in the economy should boost business-to-business.
"The third quarter of this year is supposed to be a 25% year-over-year increase in GDP. That's the biggest quarterly jump in GDP ever recorded in the U.S., and we think transports are going to really benefit from that and be at the heart of the trade of value cyclicals that we put in place at Federated Hermes in late August," said Chiavarone.
Ari Wald, head of technical analysis at Oppenheimer, agreed that economic factors are working in the transports' favor. In particular, he prefers exposure to road-and-rail industry stocks.
"We like it because it's broadly strong. You've got truckers like Old Dominion, rails like Kansas City Southern, and the one I want to talk about, Union Pacific, the biggest of them all. I think what's most notable about UNP is that it was one of the first non-technology companies to rally above its February peak. I think that's a sign of relative strength," Wald said during the same "Trading Nation" segment.
He adds that its breakout point at $188 will now provide support for the stock upon which it could build higher highs. Union Pacific closed Wednesday at $196.87. It hit an all-time high above $205 in mid-September.
