Big contract wins make logistics a tempting option
By Polly Fergusson Looking for defensive stocks is the game as the stock market continues t...
By Polly Fergusson
Looking for defensive stocks is the game as the stock market continues to fall. Logistics companies fit this bill, and all the market conditions are right for the sector to pick up speed
over 2001.
Logistics is all about moving goods around the world quickly and efficiently, and is gaining in importance, driven by economic expansion, trade growth and the increasing complexity of manufacturing processes.
The trend to outsource logistics operations to companies such as Deutsche Post, Exel or TDG is accelerating as industries focus on
their core businesses, respond to rising global competition and access the latest logistics technologies.
"The key issues for 2001 mainly relate to integration and contract gains," Dresdner Kleinwort Wasserstein analyst Mark McVicar said. "A large number of operators are in the process of absorbing significant acquisitions or are the result of recent mergers" .
Winning big contracts is crucial. Contracts are becoming larger, more complex and more international. This offers more opportunities for the winners but also adds greater risk, and so 2001 is likely to see a smaller number of more significant winners emerging.
The smaller logistics companies present decent investment opportunities, with the possibility of shareholders making good returns
if the companies get a couple of big contract wins on the table, or are taken out by bigger competitors.
"Tibbett & Britten presents the most interesting play and best long-term growth, although its progress abroad has been overshadowed by problems in the UK business," HSBC analyst Tim Barrett said.
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