Small Stocks, Big Trucks Part I: Universal Logistics Holdings $ULH

In October of last year, I wrote about how trucking was in its longest recession in history. Not only was it digesting the Covid durable goods pull-forward, punitive interest rates, and a three year manufacturing recession, but it was also suffering under a wave of CDLs being issued to illegal immigrants who frequently drive in shifts. By driving in shifts, the supply of trucks was artificially inflated, and truck owners suffered. But now we have lower interest rates, reshoring, 100% accelerated depreciation on equipment, relative tariff certainty, and the administration is working to clear the illegal CDLs from the highways.

But trucking isn’t homogenous, there are many categories. Consumer goods are shipped in Dry Van, fresh produce in Reefers, industrial equipment on Flatbeds, odd parcels in LTL, and of course there are Automotive carriers as well. While I believe all aspects of trucking will benefit eventually, the freight market for Flatbeds is the only subcategory which is tighter now than during the Covid Supply Chain Crisis. You can measure this by tender rejection rates, shippers offer a route and a price, and carriers either accept or reject. Within the last six weeks we vaulted into an industrial renaissance, and very few people seem to be aware of it.

To be fair, the rejection rates are high partially because of the reduced supply of trucks due to the illegal CDL crackdown. But even without the tight supply, demand for freight generally started exploding in the beginning of the year, and so far 2026 has surpassed 2023-2025.

I do believe the other categories will catch up, but Dry Van will need a rebound in general merchandise. I’m not sure when the consumer will recover, for this cycle it appears that industry is moving first. LTL has a significant portion of demand from specialty appliances, which makes it especially exposed to the housing market. Due to the deportations and self deportations, the interest rate cuts have stimulated industry, but homebuilding less so.

What I want right now is exposure to Flatbed trucking, and there is only one small cap that offers it, Universal Logistics Holdings (ULH). And to my surprise, even though I’m a bit slow to catch onto the fundamentals of this theme, the Iran War has suppressed the stock price, but not the fundamental story. If anything, more oil and gas equipment is likely to be shipped across the US to make up for lost foreign barrels. And from a technical perspective, the chart has even broken out of a consolidation period.

ULH trades at a price to book ratio of 0.97x, in more normal times it tends to trade between 2.0x and 2.5x price to book. It trades at 0.34x price to sales, and has in the past traded as high as 0.70x price to sales. But sales have shrunk recently due to tariff uncertainty paralyzing 2025. As you can see from the flatbed tender rejections, 2026 is a very different story. It’s not just the rejection rates, cost per mile has broken out to new all time highs. Regarding seasonality for flatbeds, the strongest part of the year is March through October. In other words, the season started off early and strong in February, and is expected to keep on strengthening for the next six months.

ULH also has one of my favorite accounting quirks in the deep value landscape. A bad year often forces the CFO to write down assets, and those non cash writedowns show up as a net income loss. In the last twelve months, ULH wrote off $124 million, and this causes net income to show as a $99 million loss. Meanwhile, if you follow the cash, ULH is making money, paying a very modest dividend, and engaging in an occasional share buyback. That’s the trifecta, shrinking share count, misleading GAAP EPS, and an inflection to a cyclical recovery.

The only thing missing to make ULH perfect would be insider buying. There hasn’t been any buying since 2023, when the stock price crashed after the Covid bullwhip. At that time Chairman Matthew T. Moroun bought around 14 million shares, bringing his ownership up to 19.5 million shares, or about 75% of the company. This makes ULH a controlled company. I like enough incentive alignment to get good behavior, but at this ownership stake, there is always a risk that Mr. Moroun takes ULH private.

It’s his train, we can jump on the caboose or not. His purchase was around $25 a share, and the current price is $19.99 a share, so we can buy it cheaper than he did. Insiders are often early, even when they’re right. It also makes future share buyback programs less likely, as it would essentially be a slow privatization. And then there’s the potential overhang if Mr. Moroun starts a sell program and prevents the stock price from reaching peak multiples for several years.

I would expect this industrial renaissance to drive ULH’s revenues north of $2 billion annually, and trading up to a price to sales ratio of between 0.50x and 0.70x would imply a price target of between $37 and $53. Of course I could be underestimating new peak revenues if this flatbed squeeze continues for a longer period of time. ULH handles Flatbed, Dry Van, Reefers, and Automotive, and they don’t offer a detailed breakdown for investors. I have seen estimates of around 35% of their revenues from the Flatbed segment, but I have been unable to verify this. I expect 2026 to be the year of the Flatbed, with Dry Van and Automotive joining the party in 2027.

Universal Logistics Holdings (ULH) $19.99: $37 by mid 2028 base case

Universal Logistics Holdings (ULH) $19.99: $53 by mid 2028 bull case