Like The Energizer Bunny, Old Dominion Just Keeps Going

One of the frustrating (and invigorating) aspects about investing is that you can be completely right … and still end up completely wrong if you’re right about the wrong things. In the case of Old Dominion (ODFL), the year and the market have developed largely as I expected back in April, with the company seeing growing weakness in volumes as the short-cycle industrial sector slowed throughout the year. And yet, with the shares up another 25% since then, what does it really matter?

I have long loved Old Dominion as a company, and if there aren’t case studies written about how this company has crafted a differentiated model in the at least somewhat-commodified less-than-truckload (or LTL) trucking space, then that needs to be fixed. Still, while I do expect a short-cycle recovery to kick in in 2020 and restore some momentum to Old Dominion’s business, I just can’t make any sense of the valuation. Sure, best-in-class operators absolutely deserve a premium, but with the shares already trading more than one standard deviation above the trailing five-year average forward multiple, I just can’t see how the shares are cheap on any fundamental basis.

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Like The Energizer Bunny, Old Dominion Just Keeps Going