Tech Talk: About Transportation, Again….

In a recent column, I argued that the Transportation Spider (XTN) was looking quite bullish, and that transportation stocks as a class were likely to do well. (I have reproduced the chart for the transportation spider at the end of this article. Although it’s taking a breather, it still looks good to me.)

Since I wrote that column, two fundamental developments are worth noting. One is rising optimism about oil prices among energy executives. The rapid response to the new interest rate by banks and other financial institutions is the other.

Perhaps rising oil prices means more people will put their money into buying used cars, since the cost of running your car will rise. That is one reason to look at the company charted above, Carmax. The company sells used cars, but it also provides auto financing, which means it will also benefit from rising rates.

As the KMX chart shows, the company recently hit a 12-month high, and both trend lines (in blue) are positive. The PPO panel recently crossed into negative territory – something I’m personally not worried about, given the trends and the recent breakout.

Although only 16 years old, CarMax is America’s largest used-car retailer and a Fortune 500 company. Today, the company owns more than 150 used car superstores, and has been on Fortune’s “100 Best Companies to Work For” list from 2005 to 2016, placing 85th in 2016.

This is my last column for this year. Invest well, and wisely.



Full disclosure: I own both KMX and XTN.

Disclaimer: The analysis and ideas presented here should never be seen as a buy or sell recommendation. I am an active trader, but ...

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Joe Economy 7 years ago Member's comment

Call it seasonal adjustment or a growing lack of interest in sedan models of GM's cars perhaps, but interestingly there were announcements of planned January factory idling by GM just yesterday as demand weakens. It announced it would be idling 5 factories throughout the US. Is this also as a possible outcome of Americans holding on to their cars for longer and buying more used cars? A July 2015 report stated that: the average age of vehicles on the road has climbed to an all-time high of 11 1/2 years—up about one month compared to last year—nearly one out of every four vehicles in the U.S. was built before the year 2000.

Peter McKenzie-Brown 7 years ago Contributor's comment

Thanks, Joe. Interesting comment.