Feature Article

Plugged into Freight

Directors at Stephens Inc.'s branch carve niche in transportation

By Chip Jones

A recent news item caught Alexander Brand's eye: Richmond-area gas station owners were cleaning out fuel tanks to prepare for the switch to ethanol as a gasoline additive.

Most people likely pictured paying higher gas prices at the pump. But Brand started thinking about barges.

Barges?

Thomas Albrecht (right) and Alexander Brand, managing partners at Stephens Inc., are two of the nation's top analysts following the trucking industry. EVA RUSSO/RTD

Brand, a managing director at Stephens Inc. brokerage's local office, gets paid for his expert analysis of -- among other things -- barge companies. He knew companies such as American Commercial Lines and Kirby Corp. regularly haul liquid petroleum and gasoline from Gulf Coast refineries up the Mississippi River into America's corn belt.

"Usually when they go up the Mississippi, there's not a lot to bring back down," Brand said.

He checked with managers at private barge companies about their plans to haul ethanol down river from the upper Midwest, where corn is converted into the fuel additive.

"Lo and behold, one of the private guys said, 'Oh yeah, we've been getting calls from refiners'" about increasing their ethanol capacity, he said.

Brand's sleuthing resulted in an April 3 report that he believes was the first industry look at ethanol's effect on shipping companies -- "Barges: A Backdoor Ethanol Play."

It was a nice scoop, and a good example of how he helps produce valuable research for Stephens, a Little Rock, Ark.-based investment company known for its top-flight transportation analysis.

Along with fellow managing director Thomas Albrecht, Brand has been honored five years running by Institutional Investor magazine as part of its All-America Research Team.

Last year, Brand and Albrecht left BB&T Capital Markets in Richmond to open a Stephens office in the Innsbrook Corporate Center in western Henrico County.

"We were attracted to the fact that Stephens is a family-owned business," Albrecht said. With consolidation in the brokerage industry, "We felt it would be one of the few regional firms that would remain independent."

Before joining BB&T, Albrecht, 43, worked at investment firms in Chicago and St. Louis. Brand, 35, started as a credit analyst with SunTrust in Atlanta.

While trucking, barges and air freight may not be seen as sexy business sectors, the all-star analysts say they enjoy tracking the ins and outs of sometimes-obscure transportation companies.

Brand said he was given industry groups no one wanted, such as trucking and air freight, when he was a junior analyst at SunTrust in Atlanta. "At 25 years old, I felt very slighted. I'll tell you now, in hindsight, what a blessing it is. I'd rather follow the industries no one wants to follow, because that adds the most value."

They can count on both hands the number of professionals tracking their companies. "If you follow IBM, there are 30 to 40 analysts," Brand said.

"It's a lot of fun to do the more nuts-and-bolts companies," Albrecht added.

They also like dealing with down-to-earth executives in the transportation sector. "Many of the top executives were truck drivers at one time who never dreamed they'd be as successful as they've gotten," Albrecht said.

Federal regulations over disclosing information about publicly traded companies have changed in recent years, forcing analysts "to look for new sources of information to verify emerging trends and better understand the stock," Albrecht said.

Their years in the business also is a plus, Brand said. "Thom and I know the management teams well enough that we can sense when something's different. It's up to us to verify our gut" feelings.

They've nurtured a network of private sector leaders and shippers who keep them posted on industry trends and developments.

Even as manufacturing jobs go offshore, somebody will always have to transport foreign-made goods back to American markets, they said.

"Even if they're all made in Asia, those finished products have to get back to the U.S.," Albrecht said.

Besides tracking shipping patterns, they study how inventory is stored and moved across the country. This generated a March 30 report by Albrecht, "More Insights Into Wal-Mart's Inventory Correction."

"Secondary sources have reported that Wal-Mart has been undergoing a significant inventory correction, by some accounts as much as $6 billion, all within about 100 days," he wrote.

The declining shipping revenue could hurt trucking companies. Yet -- in one of those twists that savvy investors grasp -- it could create buying opportunities for anyone snatching trucking stocks at depressed prices.

Whether it's good news or bad news, it's really all the same to these industry scouts.

"Bad news is good news in our business, as long as we're the first to report it," Albrecht said.

Originally published April 16, 2006. Reprinted with permission of the Richmond Times-Dispatch.

-- Sept. 28, 2006