With the new administration in place stricter regulations for transportation are around the corner, according to this week’s roundtable – and especially Jon Langenfeld of Robert W. Baird:

Mr. Langenfeld: I believe the biggest issue from a regulatory perspective involves the Employee Free Choice Act (EFCA). In the current form, the proposed legislation would represent a significant shift in power, making unionization of labor easier by authorizing unions to organize employees via “card checks” as opposed to secret ballot elections. The risk of increased unionization is a primary concern within the trucking industry. This piece of legislation is among the most frequently discussed topics of conversation, particularly as it relates to the less-than-truckload area. But it also creates risk for the broader trucking industry, the parcel players included. In 2007, then-Senator Obama co-sponsored EFCA while in the Senate, and his proposed Labor Secretary Solis supported it. Whether a piece of “card check” legislation gets through Congress and what form it ultimately takes remains unknown. Given the implications for the industry, it is something that we are watching closely.  

For the complete transportation report, including a full overview of this sector with stock picks and an outlook for 2009 and beyond, click here.

On the other side of the coin, the outlook in our second focus on Business Services is more bleak. We spoke with analyst Mark Marcon of Robert W. Baird & Co about his focus in this space: Marcon focuses on employment services- otherwise known as human capital. Here’s Mr. Marcon’s take on the current economic situation as it effects his space:

Mr. Marcon: In terms of employment, this is the worst recession in decades and potentially since WWII. The nature of this recession is clearly different from your garden-variety recession. As a result, we would expect that at least through the first half of 2009, the economy is going to continue to be constrained, and because employment lags, the companies that are directly sensitive to employment will continue to see weak demand trends throughout all of 2009, and potentially into the first half of 2010.

For the complete Business Services/Education report, including the full interview with Mr. Marcon, an look at other parts of the business services sector, and stock picks, click here.

Our special focus this week is on Education. Amy Junker, an analyst on our education panel, talked to us a little bit about what she feels the environment is like for education in this turbulent economic climate:

Ms. Junker: I think it’s a positive right now for the education industry in that as more and more people either lose their jobs or are in fear of losing their jobs, they look to go back to school to get either retrained in a new career or else beef up their resume with an advanced degree, either a Bachelor’s or Master’s, to allow them to keep the job that they have. While it’s obviously a struggle for many in the US, right now for education companies, we are seeing some positive results and some very strong enrollment trends as a result of the weak economy. So it’s been at least a positive for the postsecondary education stocks.

For the complete Education and Business Services report, including the complete roundtable panel and stock picks, click here.

Our top picks this week come from our roundtable discussion on Engineering and Construction. Analyst Tahira Afzal of KeyBanc Capital Markets tells us that the only part of her sector she can recommended is the part dealing with electric transmissions. She has two picks in this space:

• MYR Group (MYRG)
• Quanta (PWR)

Here’s why:

Ms. Afzal: I like names that are so dirt cheap that they are trading close to liquidation and, again, might have some catalyst ahead of them. I don’t think anyone wants to buy anything that doesn’t have a catalyst ahead of them. The names that I am pointing to within my coverage space would probably be the electric transmission names. I think that’s where I see a lot of project activity still going ahead. The names over there would be Quanta (PWR) and a smaller company called MYR Group (MYRG). Both are very highly leveraged in that space.

For the complete Engineering and Construction report, including a full overview of the space, an outlook for the future and more stock picks, click here.  

In our special focus on Engineering & Construction this week, we spoke with analyst John Kasprzak of BB&T Capital Markets about the state of this space. While the economic downturn has had a definite impact on E&C space, Kasprzak sees some hope for the future in how the new administration is talking about plans for construction:

Mr. Kasprzak: From a construction point of view, next year offers an interesting convergence of factors. First of all, the new administration has talked openly about trying to stimulate the economy within infrastructure spending. Every billion dollars of incremental spending creates over 40,000 jobs, for example, and so that seems to be an area of focus. Then when you consider that the current federal highway program expires September 30, 2009, and they come in six-year increments, Congress was already on tap to pass a new highway bill next year. So the timing could be good because the need is there to pass a new bill and you could combine that with a view from the new administration that an increase in spending in the new bill could help stimulate the economy.

For the complete Engineering & Construction report, including a complete interview with Mr. Kasprzak and a roundtable panel giving an overview of this space, click here.  

As a second focus this week here at TWST, we focused on the Railroad space. While analyst Kevin Kirkeby of Standard & Poor’s is neutral on the space as a whole, he does point to the strength of 3 stocks in Railroads, all based on the east coast.  These are:

1. Norfolk Southern (NSC)
2. CSX (CSX)
3.  Canadian National (CNI)

His reasons for picking these, as opposed to their west coast counterparts are fairly simple:

Mr. Kirkeby: Thematically, we favor the East Coast rails over the Western ones…They operate in regions of the country with greater population density, and a greater number of freight corridors where rail intermodal service can displace trucks. Norfolk Southern, for one, is working on its Heartland Corridor and Crescent Corridor initiatives. CSX has its National Gateway project, linking inland distribution centers to the ports. These efforts will provide an added volume boost, in our view, even if the greater economic environment proves more difficult than anticipated.

For the full interview with Mr. Kirkeby, including a complete overview of this sector, where its headed, and more stock picks, click here.

Airgas Inc. (ARG), a leading distributor of industrial medical and specialty gases, completed a deal on Monday to buy three additional businesses. With these companies, Airgas increases the number of companies it has acquired this year to a full dozen and a combined revenue of $185 million.

The three companies Airgas bought Monday are Gordon Woods Industrial Welding Supply, Inc., Accu Air Gases & Equipment LP and Summit Gas & Gear LP. These companies are separately managed industrial gas and welding supply distributors with a combined avenue revenue of $25 million and 10 different locations in Southern California.

This week, as part of our special focus on Industrial Manufacturing this week, we spoke with Peter McCausland, the Chairman and CEO of Airgas. For the complete interview click here.

For our complete Industrial Manufacturing report, including interviews and analysis from a variety of perspectives on this space, and stock picks, click here.

Our special focus this week is on Industrial Manufacturing. Like much of the market, this particular sector has been hard hit since the end of September. However analyst Jim Lucas of Janney Montgomery, LLC does have a few picks, and at the top of his list is a company called Danaher (DHR):

Mr. Lucas: Danaher, to put it quite simply, is best in class. Just go back to the first criterion, identifying companies with strong management. With Danaher, it all starts with the Danaher Business System. In my 15 years of research, it is the most unique operating culture that I’ve come across, and it is a culture that permeates the entire organization. Danaher is a prodigious cash flow generator, and they do an exceptional job of redeploying that cash in a shareholder friendly manner, meaning that, when there are opportunities when the stock is undervalued and there are not a lot of acquisitions to do, they buy back stock.

For the complete Industrial Manufacturing report, including a full interview with Mr. Lucas as well as interviews CEOs from top companies in this sector, click here.  

As part of our special focus on Utilities this week, we spoke to CEOs from top companies in the space. One of these was Nicholas DeBenedictis of Aqua America (WTR).

Last week, analysts from R.W. Baird upgraded their stock from “neutral” to “outperform”, citing the company’s robust utility operation and financial position. Analysts also claimed the company is likely to benefit from the rate relief in the third quarter, as well as the one that is expected in 2009.

Additionally, Aqua America’s largest subsidiary, Aqua Pennsylvania Inc., recently received the prestigious Management and Innovation Award from the National Association of Water Companies (NAWC) during the organization’s 2008 Annual Session in New Mexico.

For the complete interview with Mr. DeBenedictis, including a complete overview of the company, its history, how it operates and plans for the future, click here.

Our special focus this week is on Utilities. Given the current turbulence in the market, investors are undoubtedly on the lookout for a safe haven. We talked to analyst Chris Ellinghaus of Shields & Company a little about what investors are thinking about this space, and what he thinks:

On Investor Interest: 

Mr. Ellinghaus: I don’t think it’s any different from probably most industries today. Investors largely have been keeping their heads down. They have a lot of cash, or some of them have been having reductions in size of their portfolios due to withdrawals and reducing leverage. Investors across the board, including the utilities, have been sort of taking a break, waiting to see what happens. We have had a little slowdown in interest in the last couple of months, but I wouldn’t say it’s been dramatic and I suspect it’s very similar to what every other industry is seeing right now.

His perspective:

Mr. Ellinghaus: I think it is almost to the point where you could pick any utility at random and find good long-term value. Some of them are more toward the extreme ends of the spectrum in terms of valuation and I would say those will be the ones that I would pick. But, yes, the industry looks very cheap, if you have a longer-term perspective. I would be perfectly happy to buy a lot of these stocks, if I had a multi-year perspective on it. And if they got cheaper, I would just buy more. But I am skeptical that we can maintain these levels in the market right now, given there are a lot of uncertainties left and there is a lot of bad news that is yet to come out. In the absence of the market issue, yes, these are all great prices and I would definitely be looking at them, but I have to recognize that the market could definitely lose a lot of ground and the stocks could get cheaper.

For the full Utilities report, including a complete overview of the sector and stocks, as well as interviews with CEOs from top companies, click here.