Transportation stocks are seeing a volatile start to 2018, but some say any weakness should be bought.
The Dow Jones transportation average is now just barely negative on the year, but as recently as Friday it was down 14 percent from its 2018 highs hit in January. The 20-constituent index, composed of airline and transport stocks like Delta Air Lines, J.B. Hunt and Norfolk Southern, rolled over with the broader market earlier this month before making a comeback in recent sessions.
The group has room to run in the long-term, according to Michael Bapis, partner and managing director at the Bapis Group at HighTower Advisors. Here are his reasons why.
• The Dow transports index is still up 11 percent year over year, and in 2017 gained over 17 percent.
• Decades ago, it appeared transportation and technology stocks could not be more different, but a correlation between the groups is growing as e-commerce expands at a rapid clip.
• As the connection between companies like Amazon and shipping firms intensifies, transport stocks should be favored for the long haul.
• Dips should be bought for the next year to 18 months.
Bottom line: Though the transportation index has seen a bout of volatility with the rest of the market, some see long-term strength for the group and would buy on weakness.