In late 2022, against a backdrop of market uncertainty, top institutional investors BlackRock and Vanguard Group adjusted their holdings in multiple trucking companies.

The two institutions, each managing trillions of dollars in assets, aligned on some investment decisions, jointly increasing stakes in companies such as Knight-Swift Transportation Holdings, Forward Air, and XPO. This finding came from Transport Dive's analysis of securities filings.

However, other decisions showed a divergence in the two institutions' strategies at certain points. For example, BlackRock reduced its stake in Old Dominion Freight Line, while Vanguard increased its holdings.

Analysts told Transport Dive that the differences may simply reflect investment institutions rebalancing their pools of funds, and that position changes by institutions like Vanguard and BlackRock may have little significance for how the relevant companies will perform in the future.

Harvard professor Lauren Cohen wrote, "Increases or decreases in institutional investor holdings have not been proven to be systematic or robust predictors of the future returns of the underlying securities." He added that because these positions are so large, it is difficult to determine what signal an overall increase or decrease might convey.

But further analysis at least reveals some possible reasons for the divergence. Analysts believe the differences may stem from strategic distinctions between actively managed funds and funds designed to track broader market sectors.

Convergence and divergence in BlackRock and Vanguard strategies

Across position changes in more than a dozen companies, the two institutions tended to move in the same direction: generally increasing their stakes in companies.

Scott Stewart, a clinical professor at Cornell University and founder of Fidelity Investments' structured investment group and former head of its equity team, identified some reasons for the differences after reviewing these changes.

Regarding BlackRock's position in Ryder, Stewart wrote in an email, "Index fund assets did not decrease," and "the reduction was due to its actively managed funds, not index funds, selling Ryder stock." In contrast, Vanguard's broad-based funds increased their stake in the transportation company.

Stewart wrote, "The actively managed funds at BlackRock appear to be trading stocks because their views on the stocks' prospects (a combination of company trends and stock valuation) are changing."

Meanwhile, in ArcBest, both institutions increased their stakes. But Stewart noted that BlackRock's actively managed funds bought the stock, while Vanguard's position change stemmed from purchases by its Value Index Fund, which focuses on small companies. Stewart said, "This illustrates another reason behind index fund trading: changes in the underlying index."

How investment institutions view the prospects of trucking companies

Although fund changes may involve multiple factors, analysts also offered their views on how carriers are navigating a difficult economic environment.

A BlackRock corporate communications spokesperson declined to comment on these changes, but the company's2023 Global Outlookdocument provided a glimpse into its strategy.

In the outlook, BlackRock wrote that macro and market volatility may require more frequent portfolio adjustments to address "economic damage," and a new investment strategy calls for "pursuing more granular views by focusing on sectors, regions, and sub-asset classes rather than broad exposure."

Furthermore, BlackRock believes problems persist. The outlook noted that despite improvement, volatile and persistent inflation may not yet be fully priced into markets. The company wrote that valuations may decline, and the coming years might present better opportunities than the present.

Vanguard, in its2023 Outlookalso expressed its own concerns and opportunities. The company noted that its 10-year forecast for U.S. equity returns has improved compared to a year ago, current U.S. valuations are more attractive, and "a diversified portfolio across asset classes remains an effective tool for managing risk tolerance over long time horizons."

Market volatility, of course,does not catch established companies off guard. Ari Rosa, U.S. transportation research analyst at Credit Suisse, said in January while discussing broad industry trends that smart players in the industry often understand how cycles evolve.

Accordingly, companies like UPS have pointed out the potential to stand out in difficult times. Ryder CFO John Diez also noted that the market's demand forresilient supply chainshas increased.

For C.H. Robinson, CFO Mike Zechmeister said in a February 15 email that the third-party logistics company is well positioned, with technology that helps improve "reliability, increase efficiency, and lower cost-to-serve, making us highly competitive in any economic condition, especially in the current cooling market."

Although companies are preparing for a difficult economic environment, according to Satish Jindel of SJ Consulting Group, volatility across the transportation industry may be less than in other sectors of the economy. He noted that spending on services far exceeds spending on goods.

"People may travel less," he said, "but they still have to eat."