The UK transport sector has had a mixed year, with selective stocks outperforming and others sufferi...
The UK transport sector has had a mixed year, with selective stocks outperforming and others suffering on the back of the increase in fuel prices.
The FTSE All-Share Transport Index has fallen 4.55% in the year to 30 November.
Andrew Jones, fund manager at Invesco says: "Bus companies in general have underperformed. Companies like Arriva, Stagecoach and First Group have suffered from higher oil prices and a tight labour market.
"There is a shortage of bus drivers, particularly in London, and companies are limited by how much they can put fares up."
Stagecoach has fallen 60.97% in the year to 7 December. Jones said the sector has suffered from a lack of attention for some part of the year due to the interest in the technology, media and telecom sector, though it has also rallied in the past few months with the new economy's fall from favour.
Colin Morton, fund manager at BWD Rensburg says: "Bus and train operators had a mediocre year. After the first two to three months when the new economy stocks made all the running, they had a recovery. More people have been using buses and trains but in the past few months they have fallen from favour and are now finding it hard to make profits."
Jones says demand for trains has decreased recently, with people switching back to roads due to a lack of confidence is the rail system
"It is having a near term effect but what will be more of an issue is whether people go back to trains when things get back to normal and they clearly are not normal now, which is not good for the stocks in the near term."
According to Morton, the best performers in the transport sector this year have been the more defensive stocks.
"A good example of an outperforming stock is BAA, which had a very poor year in 1999 due to the abolition of duty free but jumped over that hurdle this year by introducing promotions. Air travel is a growth area, as the number of people going through BAA airports is increasing by 4-5% a year."
BAA has risen 34.14% for the year to 7 December. He says BAA is looking very highly valued at present because of its outperformance and he recently sold his entire holding in the stock, though he may look to buy it again if it comes back to reasonable levels.
Morton says: "BAA has a captive audience which is likely to spend money. On the negative side it has a regulator, but it does not set its prices too high, it is in a good position and has a monopoly on the market."
Airlines are experiencing an increasingly competitive market, particularly over short haul routes to Europe.
"I am not a big fan of airlines, going forward, they are too competitive and too reliant on premium traffic," says Morton. "I am concerned that airlines will struggle to make decent returns."
Jones said BA has recently rallied as the market likes its new chief executive. "British Airways will be able to realise some value from selling Go. Easy Jet floated recently in the UK and had a good reception."
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