I like to lean on bellwethers when I’m on the fence about a theme or area of the market.
The term bellwether comes from agrarian times. It was used to describe the sheep that leads the flock. They would put a bell around its neck.
Stock market bellwethers are similar.
To me, a bellwether is a stock that represents a broader group of stocks. These companies usually dominate their industries. Many times, they are secular leaders also.
We’re talking about JP Morgan in the world of financials. Caterpillar for industrials. Amazon and Walmart for the consumer. You get it.
And bellwethers are also vehicles. They are among the many alternatives at our disposal when we choose to express a thesis on something. They are usually some of the most liquid as well.
I use them when I am trying to keep it simple.
I am always thinking about what vehicle is best. One of the most frustrating things for market participants is making the right call, but investing in it the wrong way.
Bellwethers are often the safest or most conservative choice. Your performance shouldn’t stray too much from the performance of the group.
These stocks carry large index weightings and tend to move with their broader peer group. Sometimes, they drive the index. Other times, they are driven by it. Either way, they tend to mirror the overall group's performance as well as anything.
When looking to make a general bet on an industry group, they are ideal options.
In the case of Transports right now, I don’t know if this breakout is finally ready to stick or not.
But in the event it does, I want to make sure I’m in a transportation stock that is moving with it.
There is no better name for this than the global delivery leader, FedEx.
The company handles over 19 million packages on a daily basis, has the largest air cargo fleet in the world, and has a global logistics network that spans over 220 countries and territories.
If transportation stocks are breaking out, I’m making the bet FDX is breaking out with them.
And based on a recent insider filing, their Chief Financial Officer is thinking the same way.
Last week, FedEx’s CFO, John Dietrich filed a Form 4 disclosing a purchase of 1,000 shares, valued at $273,980. It wasn’t stock comp and is not a planned purchase. He just went out and bought some shares.
CFO buying is as good as it gets in the world of corporate insider activity. There is no one I’d rather see make a splash in the open market. The CFO knows the financials, has the best idea of future performance, and knows how the market is likely to react to it all. It’s literally their job.
Seeing the FDX CFO step in and buy shares just as the stock is on the cusp of breaking out is a significant bullish data point.
I think transports are gearing up for a big upside resolution. When it comes, I’ll be buying FDX on strength above its prior-cycle highs.
What is your preferred vehicle for transportation?
