Short-haul trucking company. High-end trucks for cargo, and theoretically an attractive employer for truckers, who don't have to drive as far as some truckers.
The Sequoia Fund bought 4 mil shares in the fourth quarter of 06 and now owns 16% of the company. Sequoia, which has been closed to new investors for years, does quite well with its long-term holdings. 33% of the company is owned by insiders, several of which are the Knight family. Not a dual-class share structure: they own alongside other shareholders.
Knight's sales and assets are growing faster than its nearest competitor, Heartland Express (HTLD), but KNX is at a slightly higher p/e right now (although it's the lowest p/e that KNX has traded at in five years). As you look further forward into the future, based on expected earnings, the valuations of KNX and HTLD even off. Long-term expected growth is 15.5%.
If you read the most recent 10-K , you'll find that the company is very disciplined in its acquisition and growth strategy. Buy small carriers and equipment at good prices. Of course, that's easier said than done.
As far as fuel risks go, the company passes on most (80% to 90%) of rising fuel costs to customers in the form of fuel surcharges, but does eat up that other 10% to 20% of those costs itself. My guess is the cost of higher fuel going forward is priced into the stock, but that if fuel prices go down, investors will be pleasantly surprised by higher earnings. But this isn't really a fuel play so much as it's an infrastructure play.
Also, keep an eye on the company's tiny but growing brokerage segment, a business where the company arranges and manages hauls for its customers. This business is very low-cost because it's not asset-based. Growth here would be good for margin.
$18.24 (05/29/07)
