New Leader in the Clubhouse - RXO
Right now my favorite idea is RXO Inc, - RXO - $15. RXO is a 2022 spinout of XPO Inc. - XPO - $119. Spinouts are often misunderstood by Wall Street.
I had a chance to spend over an hour with XPO management years ago before the spin, and I think I have a unique insight into their vision for the industry. At the center of this story is Brad Jacobs, a low profile billionaire, that built United Rentals - URI - $704. URI is now a $50 billion dollar monster that revolutionized the mundane heavy equipment rental business. Jacobs is the non-executive chairman of RXO, and the guy who hired current management at XPO and RXO.
RXO was spun out of XPO because the truck brokerage industry is ripe for consolidation. RXO began that consolidation by buying Coyote Logistics from UPS in 2024. When the economy is slow, nobody needs the extra capacity controlled by the truck brokers. When the boom begins, everybody needs the broker’s capacity. The trick is to stay solvent during the “trough”. RXO has a solid balance sheet.
My value accomplices have not yet discovered the trucking industry. T Rowe Price does have a 2% position in RXO. If you want less risk, you might consider Saia - SAIA - $268, or Schneider National - SNDR - $24 as undervalued trucking stocks.
Yes, of course, tariffs are an issue. RXO reports some companies are building inventory before the tariffs begin, other have stopped shipping completely, and the remainder are doing nothing different.
RXO is too good an idea to be constrained by the minutiae of tariffs. At 1.5x book and 50% EV/Sales, I cannot wait any longer. The real question is how do I find more RXO’s.
If I had to pick one stock like RXO it would be Core & Main - CNM - $53, a growing distributor of waste and water pipes. I am waiting for some bad news with this stock, but story is very interesting.
There are always opportunities in these “in between” industries that do not get enough coverage from Wall Street.
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Best ideas:
RXO
Brunswick
Halliburton
Teck
Matador
Thor
x
x
x
AES Corp
to be continued,