Yellow Roadway

I've been looking at this company the whole day: Yellow Roadway Corp. (Ticker: YELL), and found some very lucrative acquisitions and joint-ventures that this company is pursuing with its money. This is a company that makes its living transporting goods and arranging logistical supply lines for companies. What I love about this company, for the first time in a long time, may not be the existing fundamentals, but the promise of growth.

WHOA I'M PAYING FOR GROWTH FOR PERHAPS THE FIRST TIME IN MY LIFE!

This is a company that is now dabbling into the Chinese supply-logistics market through a joint-venture with the second largest air-freight and transportation business in the Shanghai area. Not to mention it's recent acquisition of a business very much like its own... it hasn't even finished creating synergies yet there and we can expect to see some very nice productivity and margin gains once the overhead costs of corporate administration is cut.

What I love about the transportation business is that the more it acquires, the larger it's customer networks get. And the larger it's customer networks get, the more new customers can be acquired through buyer/supplier lines. This is a business that more or less grows organically, and with enough lock-in opportunities with database and software, they have pretty good retention strategies going forward.

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The markets hate it when a company revises its own earnings estimates (especially when it is downwards) and that's exactly what happend with this particular stock. This company tanked 11% as soon as announcements were made that the EPS estimates would be adjusted from 1.60 to 1.40 for the 3rd quarter due to the effects of Hurricane Katrina on business, and due to the operational deficiencies and the longer-than-expected synergistic adjustments of Roadway Express.

Looking at the downward momentum, one gets a little scared whether or not the downward trend would continue into the future. I've decided to purchase this stock because of the very recent, very specific announcement of stock buy-backs stating specifically that the equity for this company is "significantly undervalued".

Just looking at the comparables also, this company seems to have a pretty good downside cushion, and since earnings will not be expected to go into the negative, I am not too worried about things "blowing up" as comparables will always be a nice cushion to land on when peer companies are trading for around 10x earnings.

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I'm willing to hold this stock until earnings come out on Nov 9. Thats close to a month and a half from now... we'll just have to see what happens!

*crosses fingers