A few weeks ago, my daughter graduated with honors in finance from the University of Portland, which she attended as a Presidential Scholar.
I couldn’t be prouder.
That means when she leaves grad school next May she will be stepping into a red-hot field.
But I’m here to do more than boast about my daughter’s future prospects – as fun for me as that may be.
Here’s the thing: A recent report from a key industry trade group says U.S. firms alone spent a record $1.5 trillion on logistics last year.
The momentum is this industry is driven by something you and I have been talking about for years – the rise in e-commerce.
While I was researching my daughter’s career choice, I was surprised to learn which company is considered the leader in logistics tech.
No, it’s not a freight company… or a package carrier… or a retailer or energy company with an incredibly complex supply chain.
It’s Verizon Communications Inc. (NYSE: VZ).
In today’s report, I’ll show you why that’s so.
I’ll also show you why Verizon is not the best play in this sector.
And I’ll show you who is…
Tech’s Booming Epicenter
When it came to choosing a career, my 22-year-old daughter, Jordan, had a bit of an unfair advantage.
Her mom has an MBA in finance and accounting, and I have decades of experience in Silicon Valley.
She’s heard my mantra that the road to wealth is paved by tech more times than she can count.
But here’s the real reason that her career move is so promising…
First, the U.S. economy has gone on a tear of late. We recently had the lowest unemployment rate since I was a teenager. Better yet, technology is at the epicenter of it all.
In fact, the boom in logistics comes from online ordering and the fact that logistics firms are adopting advanced tech en masse.
The Council of Supply Chain Management Professionals said spending on shipping and logistics totaled $1.5 trillion in 2017, a 20% rise from $1.25 trillion in 2008. E-commerce sales in 2017 jumped to 15.5%, bringing last year’s total to $448 billion.
While the logistics boom makes sense, the leader here – Verizon – does not at first glance.
Let me explain…
The Surprise Leader in Logistics Tech
Most people don’t know that Verizon has spent the last several years beefing up its Verizon Enterprise unit to supply a wide range of shipping and logistics tech.
In this division, Verizon has built up a range of cutting-edge solutions that focus on connectivity, security, client communications, systems controls, managing physical assets, and more.
Logistics, using an advanced platform of telematics, plays a key role here. It’s the telematics – the long-distance transmission of computerized information – that brings together the in-vehicle technologies, road transportation, road safety, and the management of sensors, instrumentation, wireless communications, and internet.
Clients get real-time information and insights from their fleets to help make faster, better-informed decisions.
And Verizon got in on the ground floor.
The telecommunications provider became a key player in this field in August 2016 when it spent $2.4 billion to acquire Fleetmatics Group PLC. Around the same time, Verizon also bought up Telogis.
Fleetmatics’ web-based GPS tracking systems allowed fleet operators to monitor vehicle location, fuel use, speed and mileage, and other insights into their mobile workforce. Telogis developed cloud-based solutions for telematics. Their blue-chip auto sector client list included Ford Motor Co. (NYSE: F), General Motors Co. (NYSE: GM), and Volvo AB (OTC: VLVLY).
Verizon has since rebranded its bulked-up telematics division to become Verizon Connect. In the first quarter of 2018, this division saw a 13% jump in sales to $234 million. Over the course of 2018, it could very well be a $1 billion standalone business.
But that’s just a sliver of Verizon’s $126 billion in annual sales.
Now, as much as I respect Verizon and the advances it’s making, there’s a much better “pure play” here.
A More Logical Logistics Play
Founded in 1979 with just one operation in Seattle, Expeditors International of Washington Inc. (Nasdaq: EXPD) now controls a global supply-chain tracking network with 322 locations in 103 countries on six continents. They have built a broad foundation in supply-chain logistics controls with telematics playing a central role in that effort.
Of course, Expeditors brings in the right hardware to help monitor fleets and other supply systems, but the real focus here is developing the perfect software.
From fleet tracking and order management to distribution and customs systems, the firm’s software teams work closely with industry-leading logistics experts.
Expeditors serves several global industries, including autos, aerospace, energy, healthcare, retail and technology.
Because cloud-based access to data flows is so crucial for global clients, the company monitors some 3,763 computer servers around the world.
The auto sector is a great example of just how Expeditors serves its clients. The firm helps keep automobile and parts shipments running smoothly around the world with such services as route design and optimization, finished vehicle logistics, vendor inventory management, and cross-border customs management.
And the firm’s bottom line shows the sort of value this company brings to the table…
Revenue rose 13% last year and is on pace to grow at a slightly faster rate this year. In fact, during the most recent quarter, profits jumped by 51% and earnings grew by 155%.
In other words, Expeditors is improving its operations and preparing for the global logistics boom with high-margin tech products.
With things going this smoothly, it’s looking at earnings growth of 30%.
The Right Tools at the Right Time
Even with a possible trade war on the horizon, this firm’s operations are actually looking stable.
Here’s why…
Warehouse space to store goods is the tightest we’ve seen since 2000. In fact, brokers at CBRE Group Inc. (NYSE: CBRE) say vacancies have been falling for 32 consecutive quarters.
Container imports at the ports of Los Angeles and Long Beach rose 8.4% in June from the year-ago period, making the combined Southern California port the nation’s largest gateway for seaborne trade.
Add it all up and you can see that Expeditors has the right tech tools at the right time. They’re ready for a boom in shipping and logistics.
Growing global trade means this is a stock you can count on for the long haul. And with this exciting shipping-tech play, you really will be on the road to wealth.
— Michael Robinson
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Source: Strategic Tech Investor