By Paul R. La Monica

The Dow Jones Industrial Average keeps hitting record highs and its cousin, the Dow Jones Transportation Average, is close to doing so.

That combination is a great sign for the broader economy and stock market. But as planes, trains, trucks, and boats keep chugging along, it may be time for investors to look more closely at the modes of transportation they want to bet on.

"The Transports have seized the baton -- becoming one of the strongest charts in our technical work," said Greg Swenson, a senior research analyst and co-portfolio manager with The Leuthold Group, in a report. "That rotation could signal both a broadening of market leadership and more upside for the market overall."

But Swenson added that investors need to be more nuanced when looking at the sector. "While Transports are often discussed as a single industry, dispersion beneath the surface is elevated," he said.

With that in mind, Swenson said his firm favors air freight and logistics stocks. He didn't identify specific companies, but this group includes FedEx and United Parcel Service, as well as Expeditors International and C.H. Robinson Worldwide.

"The industry has rebounded off all-time relative valuation lows as trade restrictions have eased," Swenson said, adding that investors had also been worried about increased competition from Amazon.com, Walmart, and Target as they have built in-house logistics networks over the past few years. Concern about labor disputes and excess capacity has been a problem, too.

Shares of FedEx and UPS still look reasonably attractive, trading at 17 and 18 times the earnings expected for the next 12 months. Expeditors International and C.H Robinson Worldwide have forward P/E ratios of 27 and 32, respectively.

So what about the rest of the transportation sector?

Railroads and trucking companies suffer from the fact that "their fundamentals are more impaired and valuations look less attractive," Swenson said. The trucking stocks aren't worth buying, mainly because of "deteriorating profitability and negative earnings revisions," he said.

CSX, Union Pacific, J.B. Hunt, and Old Dominion Freight Line are some of the railroads and truckers in the transportation average.

That leaves the airlines, companies such as Southwest Airlines, Delta Air Lines, United Airlines, and American Airlines, which have all benefited from a rebound in leisure and business travel. Swenson says their stocks are more attractive than railroads and trucking, but he is slightly less positive about them than the logistics companies.

The primary reason? Airlines are more subject to the twists and turns of the broader economy and sentiment.

Swenson pointed out that the airline industry is "somewhat of an outlier among Transports as it moves people, not goods, and can act like a Consumer Discretionary group at times." That being said, he noted that "valuations are historically cheap and profitability continues to pick up post-Covid."

Still, airlines face risks that other transport stocks don't. Larry McDonald, founder of The Bear Traps Report, said in a recent newsletter that "we need to be cautious about airlines" because "they have enjoyed a nice run in the wake of the transport rally."

He is worried that any further budget and government-shutdown battles in Washington could lead to halts in funding for the Department of Homeland Security and thus the Transportation Security Administration.

"This could lead to severe disruptions at airports," McDonald said. "Given the disagreement, the market may assume that this will last several weeks, with risks of spoiling Spring Break travel and a significant loss of revenue for airlines."

Investors may not be pricing in that scenario just yet, meaning airline stocks could be at risk for a pullback. Companies shipping consumer goods, rather than carrying consumers, may be the ones to stick with.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 10, 2026 14:12 ET (19:12 GMT)

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