Dear Mr. Market:

What’s the first term you think of when discussing the economy? Stocks, bonds, gold? How about Supply & Demand?

On a recent flight to Salt Lake City, Utah, we saw a “picture worth a thousand words”. Matt Pixa, founder of My Portfolio Guide, LLC, took this picture from the air and also went out to pick the brains of some contacts he has in the import/export business to help put more color to the canvas.

If you zoom in on the picture it almost doesn’t do it justice. There are almost 50 cargo ships waiting to unload but basically stuck out there for weeks. Why are all these cargo ships lined up and floating outside the Long Beach and Los Angeles ports?

It’s basically a “good news bad news” tug of war right now. August is typically the busiest time of year leading up to the holidays anyway but we’ve never seen this sort of backlog. Another reason for the surge is due to some of the restrictions lifting from the pandemic and a U.S. economy that is trying to get back on its feet after being shut down. The two ports of Long Beach and Los Angeles account for over one third of all US imports serving as the main source of trade with China. These ports have been slammed with pent up demand, panic buying earlier in the year, supply chain disruption overseas, and all of it amplified by a lack of warehouse capacity coupled with a labor shortage. As of last count on Monday there were actually 56 cargo ships dotting our coastline just waiting to unload.

“Time is money” and all the backlog is causing not only delays but increased costs. The volume is actually predicted to increase to even further levels surpassing all prior records. We’re not just seeing this supply chain disruption in our ports but with rail as well. Chinese authorities have implemented restrictions such that all goods arriving from Europe have to be fumigated then relocated to separate warehouse where each piece of cargo is then disinfected individually. Not only does all this cause further delays and bottlenecks but of course increased costs which we’ll all see as end consumers.

So how does all this information lead to investments and/or make you some money?!? We’re not ambulance chasing here nor banking all our eggs in one basket, but due to the current end impending environment there will be more upside to certain carriers and shipping companies. If you can’t decide or know where to start on choosing an individual stock, consider diversifying with a fund or better yet, an ETF (exchange traded fund). There’s a ton to choose from in that space too but here are a couple to help you begin.

First Trust has an ETF that gives you a bit more exposure to other market caps and perhaps a broader slice of transportation stocks. Click here to check out the First Trust Nasdaq Transportation ETF (FTXR). Earlier this month the only pure play shipping ETF was launched by SonicShares. Check out BOAT and click here to learn more or to read their prospectus.

For some individual stocks to check out in this space the first couple obvious household names that come to mind are FedEx (FDX) and United Parcel Service (UPS). Between the two we probably would lean towards FedEx as they have a better valuation trading at just 13 times earnings versus 27 for UPS.

C.H. Robinson Worldwide (CHRW) is one of the better freight transportation and logistics companies in the bunch. They’ve managed to ward off numerous competitive threats over the years but like anyone in this space they continue to deal with the same macroeconomic and pandemic headwinds that others face. Another company worth looking at is Matson (MATX) which currently trades at about $83/share and only 9 times earnings. Year to date this company is up +46% but don’t let that fool you into thinking that the train has left you at the station. We’d be buyers of this on broader market dips and can easily see it hit $100 in the next year.