With a few clicks, a shiny object made thousands of miles away can come hurtling to your door at breakneck speed. That’s thanks to logistics companies, which are helping to turn our planet into a “global village”.
Many investors are excited by this £6.3 trillion industry. They hope the rest of this decade will bring rapid growth for companies that make online shopping and international trade possible, as millions more people in developing countries get internet connection and improved transport infrastructure.
What are the best logistics stocks?
Logistics involves everything from shipping to warehousing and door-to-door delivery. This complexity creates lots of space for competition. As an introduction to some of the biggest players, we’ve chosen the top 10 components of the S&P Transportation Select Industry Index.
This index is made up by stocks in the GICS Air Freight & Logistics, Airport Services, Cargo Ground Transportation, Rail Transportation, Highways & Rail Tracks, Marine Transportation, Passenger Airlines and Passenger Ground Transportation sub-industries.
Logistics stocks are shares in companies that specialise in transporting and warehousing goods. Moving items from one place to another involves plenty of efficient planning from freight and delivery firms.
It’s because of logistics companies that we can savour exotic fruits and out-of-season vegetables while using our Chinese-manufactured smartphones and relaxing on furniture crafted from Norwegian pine.
Nowadays, logistics companies are increasingly stepping up their game to bring products from the other side of the world right to our doorstep, with the High Street middleman getting cut out of the picture.
How to invest in logistics stocks
Open a share dealing account. Whether you want to invest directly in logistics stocks or use an investment fund, you’ll need to open a share trading account.
Fund your account. The next step is to deposit money into your account to buy shares or invest in a fund, either by bank transfer or using a debit card.
Choose your logistics stocks. Either select a direct or indirect logistics investment and research the stock you’re considering. Once you know what you want, find the logistics stocks on your platform.
Review and hit buy. It’s as simple as that.
Compare share dealing accounts to find the right platform for you. Make sure to use a platform with access to international markets or a large exchange-traded fund (ETF) selection if you want to invest in top logistics stocks from around the world.
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Why do people want to invest in logistics stocks?
Adding logistics stocks to your portfolio could make sense if you’re excited about one or more of these big trends:
Global trade growth. As international trade blossoms, so does the demand for logistics services. This includes everything from global shipping to last-mile delivery.
E-commerce boom. With more people shopping online, there’s a massive need for efficient delivery systems. Logistics companies are crucial in making sure that everything from magazine subscriptions to your weekly groceries arrive without issues.
Technological advancements. The logistics industry is increasingly adopting technology like artificial intelligence (AI) and robotics. This tech drive not only streamlines operations but also makes these companies more future-proof, productive and profitable.
Infrastructure development. As developing countries invest in infrastructure, logistics companies stand to benefit. Better roads, ports, and airports mean faster and more efficient movement of goods. In addition, the expansion of internet connection globally could plug millions more buyers and sellers into the e-marketplace.
Investing in logistics stocks essentially means backing the world’s constant and growing demand for moving goods around.
But remember, while clicking ”buy now” on your latest online purchase is a breeze, investing in logistics stocks requires a lot more thought. Scroll down to uncover the risks of putting your hard-earned money in logistics stocks.
What are the risks of investing in logistics stocks?
Before you fill your shopping basket with the best (or worst) logistics stocks, it’s important to be aware of what could go wrong. Here are just some of the things that keep investors in logistics stocks awake at night.
Market fluctuations. The logistics industry is highly sensitive to global economic conditions. For instance, changes in trade policies, economic downturns, or supply chain disruptions (like those seen during the COVID-19 pandemic) can spell big trouble for these stocks.
Technological disruptions. As logistics firms integrate new technologies, companies that fail to keep up with advancements like automation, AI, or blockchain could end up on the scrapheap of history – leaving their investors with big losses.
Geopolitical and regulatory risks. Changes in international relations and trade agreements can strangle logistical operations. New regulations or tariffs may alter trade routes and costs, hitting the bottom lines of logistics companies.
Environmental concerns. As the world gets more serious about sustainability, logistics companies may find themselves squeezed by the iron fist of green regulations. Their services could be boycotted by tree-huggers who champion “buying local”. After all, it’s no surprise that transporting products around the globe can be a dirty business.
When investing in logistics stocks, you’re navigating a complex and interconnected space. It’s vital to research these risks before diving in.
Our expert says: What’s the best way to invest in e-commerce logistics stocks?
"If you want to cash in on the logistics boom that’s been ignited by e-commerce, there are a few options. One is to invest directly in e-commerce stocks, which includes the likes of Amazon (AMZN), Shopify (SHOP), Etsy (ETSY). However, these investments expose you to more than just logistics.
Another tactic is to use an ETF like the L&G Ecommerce Logistics UCITS ETF, for example. This is an ETF that tracks the performance of the Solactive Ecommerce Logistics Index. This index tracks global stocks that are involved with the warehousing or fulfilment and delivery of goods and software solutions companies that provide e-commerce logistic services."
If leafing through shipping companies’ annual reports sounds like a quick route to a headache, picking individual stocks might not be for you. But don’t worry, there are other ways to invest in the space:
Logistics ETFs and index funds. One straightforward approach is investing in exchange-traded funds (ETFs) or index funds that track logistics industry benchmarks. This provides a simple and cost-effective way to gain broad exposure to top logistics stocks with a single investment. For example, the ProShares Supply Chain Logistics ETF (SUPL) tracks the performance of the FactSet Supply Chain Logistics Index.
Logistics-focused investment trusts. If you prefer a more hands-on approach, you might consider investment trusts concentrating on the logistics industry. These usually involve higher fees, because you’re paying for a group of experts to curate and actively manage a logistics-focused portfolio.
Industrial real estate investment trusts (REITs). Although REITs can have a focus on various property areas, some are centred around warehousing and logistics. For example, Prologis (PLD) is an industrial REIT that’s customers include behemoths like Amazon, Home Depot and FedEx.
Picking individual stocks can be lucrative if you get it right, but disastrous if you choose a duffer. While ETFs and investment trusts are also risky, with these options you get the benefit of diversification. In theory, this should make your portfolio sturdier and less likely to suffer sudden and severe drawdowns.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Pros and cons
Pros
International trade expansion boosts demand for logistics services
The e-commerce surge heightens the need for efficient delivery
Technological advancements in AI and robotics are enhancing operational efficiency
Cons
Logistics stocks are vulnerable to market shifts, with global economic changes impacting performance
Failing to adopt new tech like automation can affect investment returns
Geopolitical and regulatory changes can significantly disrupt operations
Bottom line
Logistics companies are like the circulatory system of the global economy. Their role is to move goods from point A to B, like blood vessels carrying oxygen around the body. But logistics companies are also sensitive to the health of the global market. Economic shifts in supply chains and technological advancements can either strengthen or strain this system. Also, tariffs and regulations can impact the flow, much like a blood clot that blocks arteries.
So, as you consider investing in logistics stocks, remember their essential yet delicate role. Keeping your finger on the pulse of global trade flows isn’t easy. You might want to outsource the job of picking stocks to a fund manager or simply invest in an ETF that tracks an index of key logistics stocks.
Yes, the logistics sector is experiencing rapid growth, largely driven by the global e-commerce boom. Analysts at Precedence Research estimate the logistics sector was worth just under $8 (£6.3) trillion in 2022 with an impressive compound annual growth rate (CAGR) of 10.7% forecast for 2023 to 2030.
Pitney Bowes (PBI) offers a current chunky dividend yield of 4.8%, but with some instability in its payout history. DHL (DHL) also has a reasonable dividend yield of 4%. Keep in mind share prices can fluctuate, impacting the dividend yield. And dividends are never guaranteed.
Amazon is primarily known as an e-commerce stock, but it also has significant involvement in logistics through its vast distribution and delivery network. Additionally, Amazon operates in various unrelated businesses. Therefore, Amazon is not a “pure play” when it comes to investing in logistics.
Mark is a freelance journalist whose work has been published in The Motley Fool and The Guardian, among other sites. He's worked as a data journalist and has a BA in Economics from the University of Sussex as well as an NCTJ journalism qualification. See full bio
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