ACT Research

ACT Research is a leading private publisher of data, market analysis, and forecasting for the North American commercial vehicle industry. Think of it as the go-to source for everything related to the big trucks and trailers you see crisscrossing the continent's highways. While a subscription to its detailed reports can be pricey, its publicly released data and insights are a goldmine for investors. Why? Because the health of the trucking industry is a powerful economic indicator. When businesses are optimistic about the future, they order more trucks to ship more goods; when they're worried, those orders dry up fast. For a value investor, understanding these boom-and-bust cycles is critical. ACT's data provides a real-time glimpse into the engine room of the economy, offering clues about economic direction and investment opportunities in a deeply cyclical industry long before they show up in official government reports.

Tracking data from ACT Research isn't just for industry insiders; it's a savvy move for any investor looking to gain an edge in understanding the broader market. The commercial vehicle sector is a canary in the economic coal mine.

The demand for new trucks is a direct reflection of business confidence and freight demand. Consider this: a company doesn't spend hundreds of thousands of dollars on a new semi-trailer unless it expects to have goods to haul in the near future. Therefore, a surge in truck orders, as reported by ACT, often precedes a period of economic expansion. Conversely, a sudden drop in orders can signal a slowdown or a potential recession. By following ACT's monthly reports on truck orders, production, and inventory, an investor can get a feel for economic momentum that is often more timely and tangible than broader macroeconomic statistics.

For a value investor, cyclical industries are fertile ground for finding bargains. These are sectors whose fortunes are tied directly to the business cycle, leading to dramatic swings in revenue and profit. The commercial vehicle industry is a classic example. ACT's data helps investors pinpoint where we are in the cycle.

• The Trough: When ACT reports that net orders for Class 8 trucks have collapsed, backlogs are shrinking, and used truck prices are in freefall, it often signals maximum pessimism. This is precisely the time a value investor might start looking for bargains among high-quality truck and engine manufacturers like PACCAR or Cummins, whose stock prices have likely been punished.
• The Peak: When ACT's data shows record-breaking orders, stretched production backlogs, and sky-high freight rates, it's a sign that the party is in full swing. This might be a time for caution, as the cycle could be nearing its peak. An investor can use this information to avoid overpaying for stocks or to consider trimming positions before the inevitable downturn.

While ACT Research provides a vast amount of data, a few key metrics are particularly useful for the average investor.

This is the headline number. Class 8 trucks are the heavy-duty “big rigs” that form the backbone of the freight industry. Net orders (new orders minus cancellations) are the most forward-looking indicator of industry health. A string of months with strong orders suggests manufacturers will have full production schedules and strong pricing power for the next 6 to 12 months. A sharp, sustained decline is a major red flag.

This ratio measures how many months it would take to build all the trucks currently on order at the current monthly production rate. For example, if the backlog is 150,000 trucks and the industry is building 25,000 per month, the backlog-to-build ratio is 6 months (150,000 / 25,000). A high and stable ratio (e.g., 8-10 months) is very healthy, indicating strong demand that protects manufacturers from having to offer discounts. A rapidly falling ratio signals that new orders aren't keeping pace with production, and a downturn may be imminent.

The market for used trucks is incredibly sensitive to the balance of freight supply and demand. When there are too many trucks chasing too little freight, used truck prices plummet. This can be a leading indicator for the new truck market. After all, if a fleet manager can buy a lightly used truck for a fraction of the cost of a new one, they will. A sharp drop in used vehicle values, often highlighted in ACT's reports, can precede a fall in new truck orders.

While ACT Research provides invaluable, high-frequency data, it is not a crystal ball. It is one tool among many in an investor's toolkit. The data is focused specifically on the North American commercial vehicle market and should be combined with a thorough fundamental analysis of individual companies. Always look at a company's balance sheet, management quality, and competitive position before using cyclical data as a trigger to buy or sell.