Freight data provides insight into general economic performance, he tells CNBC
Donald Broughton, managing partner and principal of Broughton Capital, on CNBC this morning, talked of the importance for investors to study underlying market fundamentals to more accurately forecast economic trends. This includes, he noted, underlying freight data, which can be used to model scenarios for various sectors of the economy.
“If you look back at the DAT truck data, which is essentially the NASDAQ of truck freight brokerage, you would know ahead of time,” he told the network. “Again and again in the market, people say they were surprised by [economic reports], but I want to say not if you were looking at the underlying data.”
Broughton noted that by looking at the different types of freight data available, it becomes easier to identify trends and more accurately predict future economic performance. Having this information can increase participants' - whether they are industry stakeholders or investors - knowledge of where opportunities may lie in the months and years ahead.
“Is it refrigerated? Is it dry van? Where is the origination point? Where is the destination point?” he asks.
As an example, Broughton noted the recent housing starts slump in the U.S. This week, the government reported housing starts fell 2.6% in April following a 6.6% decline in March. Investors were surprised by the April numbers, which fell below expectations, but Broughton said that if you follow lumber shipments on rail, which have been falling, “housing starts being down is not a surprise.”
From a freight perspective, a key takeaway from the interview is the importance of studying data and using that knowledge to make better informed decisions. Pricing in the industry, particularly around rates, can be volatile. For example, in the past few weeks, shifting weather patterns in the country have created more rate and volume volatility. That’s one of the reasons a company called TransFX has started developing tradeable futures contracts.
The Chattanooga, TN-based company is using DAT data to settle those contracts. But, as Broughton noted, by studying the underlying data, investors can get a better handle on future performance, be it macroeconomic trends for freight transport or possible futures contract performance.
TransFX’s futures contracts are financially settled contracts that brokers, carriers, shippers and others can invest in to help minimize their overall exposure to rate swings. The contracts are not for physical capacity, but rather are designed as financial tools that can be used in overall risk management practices.
In the interview, Broughton also noted that ecommerce is “doing extraordinarily well” and flatbed continues to perform well.
As to a general economic outlook, Broughton said it depended on where you sit within the economy.
“The economy is still in a relatively slow to no growth mode,” he said. “But it completely depends on what mode you are looking at. If it’s retail and you are Macy’s, it’s not so good, but if you are Amazon or almost any other e-tailer, the sky’s the limit.”