This Obscure Company Brings Shareholder Value by the Truckload

By Lucas Downey, Contributing Editor, TradeSmith Daily

There are a lot of places you can park your money. But only a few are worthy.

With thousands of stocks available at the press of a button, it’s easy to miss some of the biggest opportunities. Especially when many of the best investments come from the little-known, unsexy companies quietly beating the market.

This is where being armed with a data-driven approach shines...

With comprehensive tools, we can single out those boringly effective companies whose performance dwarfs the broad market... even if you’d never see them in the headlines.

And today we’ll dive into one of my all-time-favorite trucking companies that you’ve likely never heard of, Old Dominion Freight Line (ODFL).

Old Dominion is one of the largest regional less-than-truckload (LTL) companies in North America. In layman’s terms, they transport all kinds of smaller loads with their big-rig fleet.

This is a company I’ve followed for many years due to its killer growth-stock profile.

There are three major reasons ODFL is a top industrial stock to buy and hold long-term, and I’ll share them all with you today.

As a bonus, I’ll include an awesome historical signal study that suggests now offers an opportune entry point...

Let’s get truckin’!

ODFL’s Incredible Outperformance

Before we get into the fundamental reasons to consider ODFL for your portfolio, have a look at the incredible performance of the stock.

It may surprise you to learn that ODFL has absolutely pummeled the market for years. Here’s a five-year view of ODFL alongside the S&P 500 ETF (SPY).

ODFL has cruised to a 272% gain, easily besting the S&P 500’s 109% climb:

With market-beating performance like this, there must be fundamental drivers supporting this continual upward trend.

And boy are there. As I’ll show you, management has focused on creating value for shareholders for many years.

Ride along with companies that put shareholders first and odds are you’ll find a champion-quality stock...

3 Reasons to Own Old Dominion Fright Line (ODFL)

One of my favorite signals that alerts me to a shareholder-friendly stock is share buybacks.

Companies can spend their money in all sorts of ways, including servicing debt, issuing dividends, or taking shares off the open market via share buybacks.

Pay less attention to what a company says they’ll do. Instead focus on what a company is actually doing.

Reason No. 1 to consider an investment in Old Dominion Freight Line comes down to management being a serial buyer of its own shares.

When shares are removed from the open market, it accomplishes two goals:

• First, it gives current investors a larger percentage of ownership of the outstanding float.
• Second, less shares outstanding allows for earnings per share (EPS) to increase.

Below details the great job that management is doing for shareholders by constantly buying back shares.

In 2014 there were 258.3 million shares outstanding. Fast-forward to 2024 and that number has dropped 16.8% to 214.8 million shares:

I’ll say it again, there are a lot of places you can park your money. But if you’re putting it somewhere that doesn’t create shareholder value, you’re missing out.

Which leads me to the No. 2 reason to bet on ODFL stock: the outstanding dividend growth.

Dividends are simply a way for a company to share a slice of its profits with investors. Finding cash-generating machines that raise their payout year after year is one of the holy grails of investing.

Here we can see the powerful dividend growth that ODFL has achieved since 2017 with annual payouts rising double digits every single year.

With 2024 estimates pegging full-year dividends per share of $1.04, that’s a 511% increase from the $0.17 payout in 2017:

Dividends should always be part of a balanced portfolio.

And the final reason I’m blowing the bullish horns on Old Dominion’s stock comes down to its current dividend yield signaling a bullish move ahead.

If you take a glance at the chart below, you’ll see a long-term chart of ODFL on top and its next-twelve-month (NTM) dividend yield plotted on bottom.

You should notice that the current NTM yield sits at 0.68%, one of the highest readings in the in the last 10 years:

This is important to note because looking back, whenever this stock has sported a historically elevated yield, it’s been a bullish omen.

Check this out...

I went back and grouped each instance when ODFL’s stock had an NTM yield of at least 0.5%. This produced 25 discrete periods including:

• 4 instances in 2017
• a brief moment in 2018
• 3 periods in 2019
• 1 instance during the COVID crash in 2020
• 3 instances in 2022
• And 13 instance in 2024

Here’s the fascinating part of the 0.5%-or-better level for ODFL yield. The forward stock performance is extraordinarily bullish...

When Old Dominion Freight Line shares yield 0.5% or higher:

• One month later, the stock gains an average of 5.4%
• Three months later, the stock has an average gain of 17.2%
• Six months later, the stock gains an average of 36.6%
• 12 months after this level, shares have gained an average of 74.1%

Those are some eye-popping returns if you ask me! Not to mention, all of these returns beat the annual return of the benchmark S&P 500 by orders of magnitude.

It just points to the wealth that can be created when you align your portfolio with a management team that is focused on rewarding shareholders.

Now to be clear, I am not calling for gains of this magnitude! But what I will say is that you shouldn’t expect the current, relatively high yield on ODFL to last long.

If history is any guide, dividend-growth investors will be snapping up this precious cargo before you know it.

Especially with the Federal Reserve’s first interest-rate cuts growing closer by the day.

Never stop seeking the rare few shareholder-friendly market-beaters out there...

And better yet, let TradeSmith do the portfolio heavy lifting. Michael Salvatore and I will continue to keep you posted about the most compelling opportunities our tools turn up, as always, here in TradeSmith Daily.

Regards,

Lucas Downey
Contributing Editor, TradeSmith Daily