The financial markets have provided investors with their sentiment for the United States economy moving forward through price action in different asset classes like stocks, bonds, and commodities. From the way gold is making new all-time highs while bond yields are on the rise, investors could assume that one single theme is taking over the behavior coming out of the different markets.

Despite being a new asset class, this price action adds to the inflation theme, especially in other inflation-linked assets like Bitcoin, which is considered out of the rest of the markets. Why inflation? Because the Federal Reserve (the Fed) started cutting interest rates and has also stated that they want to start supporting the labor market in the country.

The problem is that the services sector is already filled with high employment. In contrast, the manufacturing sector (as judged by the manufacturing PMI index) needs to catch up in this metric. For this reason, new inflation is likely to come from the manufacturing names in the market, and why stocks like Prologis Inc. (NYSE: PLD), Broadstone Net Lease Inc. (NYSE: BNL), and even Old Dominion Freight Line Inc. (NASDAQ: ODFL) could come into play in the coming months.

Warehousing and Logistics Rally: Markets Trace the Comeback Momentum

The transportation sector, with trucking stocks in particular, has led the way in terms of price action since the presidential election results for the United States were released. This means the markets see new policies as accretive to business activity and the need to transport and warehouse raw materials.

This is where Prologis stock becomes attractive. It offers a robust network of warehouses and logistics centers to support the increased activity in the trucking and transport sector. The stock trades at 84% of its 52-week high, giving markets enough room for a decent pushback to its previous highs.

Knowing Prologis's role in this setup, Wall Street analysts now see the stock going to a consensus price target of up to $131.25 a share, calling for a net upside of 13.3% from where the stock trades today. However, some were willing to stand out from the pack, particularly those at Scotiabank, after reiterating their Sector Outperform rating for Prologis stock.

This time, the rating came alongside a higher price target of $136 a share, for a bit extra upside than the consensus at 17.5% from today’s level. To back this sort of upside, Wall Street projected up to $1.5 in earnings per share (EPS) in Prologis for the next 12 months, a growth rate of just under 50% from today’s $1.08 profit level.

Broadstone Net Lease: Why Both Short Sellers and Institutional Buyers See It as a Buy

Operating in similar verticals to Prologis, as a real estate investment trust (REIT) holding mostly industrial property, there is one difference maker to make Broadstone Net Lease stock a buy with much more potential upside than where it trades today.

Because this company trades at a market capitalization of $3.4 billion, compared to Prologis’ $100 billion and over, investors can see more aggressive price moves in percentage terms, and that is where the money is made. Short sellers understand that smaller companies will rally the most in this trend, so they start to run from the stock.

Broadstone Net Lease stock’s short interest declined by over 8.9% in the past month, a direct sign of bearish capitulation in the face of all the bullish tailwinds that could be headed to the stock in the coming quarters. Some institutional buyers caught onto this trend and decided to take action before it was too late.

Allocators from Geode Capital Management decided to boost their Broadstone Net Lease holdings by 1.3% as of November 2024, bringing their net position up to $156.8 million today. Investors can take this move as a complementary bullish signal, given that the short sellers also closed down their positions last month.

Why Old Dominion Freight Line Stock Justifies Its Premium Valuation Today

Compared to the rest of the transportation sector, Old Dominion Freight Line stock’s 38.5x price-to-earnings (P/E) ratio today calls for a significant premium above the sector’s average 18.9x valuation multiple today. Some might call this expensive and full of downside, but the opposite is true.

Markets will typically overpay for a stock believed to be in a position to outperform the rest of the pack. In the case of Old Dominion Freight Line stock, a few factors could make this the case. Starting with Wall Street analyst sentiment, there is room for another rally in the stock coming up.

That’s what those at Citigroup believe after they raised their price targets in Old Dominion Freight Line stock to $241 a share from a previous $201 target. To prove this new view right, the stock would need to rally by as much as 10% from where it trades today.

However, that valuation may not reflect the potential growth and upside the company could achieve in the coming months. The reason for the valuation premium will only become clear in hindsight, and by then, it is already too late.