Trucking Companies Drive Home Point: Indices Can Be Misleading

Charles Dow, the first editor of The Wall Street Journal, had many prescient investing theories. One stated that a breakdown in transportation stocks presaged a downturn in the overall economy.

However, Dow's observation is being test right now. The largest players in the trucking field  -- J.B. Hunt Transport Services, Heartland Express and YRC Worldwide -- should see revenue gains between 5 and 13 percent. Yet while these large trucking companies are doing well, there is still a buildup of inventory at wholesalers, manufacturers and retailers, and this does not bode well for the entire economy.

So why the anomaly? It turns out that ONLY these large trucking companies are doing well; they are largely meeting the withered demand for trucking by themselves. Smaller companies have not been able to invest in the newer vehicles and the people needed to meet the demand. So manufacturers and retailers will be paying higher transportation prices because the trucking industry is short about 20,000 drivers (according to industry analysts).

So the lessons to be gleaned from this:

• Old theories should be heeded, but not blindly.
• A rising tide does not lift all boats. Sometimes the better maintained boats do better.
• The principle of supply vs. demand certainly applies to talent: Members of the trucking industry are competing for quality drivers, which are in short supply right now.