Imagine possessing a crystal ball that could clearly reveal the pulse of freight markets months in advance, allowing investors to strategically position their capital. The Cowen/AFS Freight Index, a collaborative effort between Cowen Inc. and AFS Logistics LLC, aims to be precisely that—a powerful predictive tool designed to navigate the volatile logistics landscape.
Cowen/AFS Freight Index: Forward-Looking Insights for Investment Decisions
Unlike traditional retrospective analyses, the Cowen/AFS Freight Index provides predictive pricing tools across multiple transportation segments, including Less-Than-Truckload (LTL), Truckload (TL), and parcel shipping (divided into express and ground services). Its core strength lies in robust data infrastructure and advanced analytics capabilities:
- Data-Driven Depth: Leveraging AFS Logistics' extensive freight data across transportation modes, the partnership unlocks previously untapped analytical value.
- Machine Learning Precision: Cowen applies advanced machine learning algorithms to AFS's freight data, revealing underlying patterns and trends.
- Holistic Analysis: The index incorporates both macroeconomic indicators and microeconomic factors, including carriers' General Rate Increase (GRI) announcements, enhancing prediction reliability.
- Continuous Refinement: Quarterly updates ensure the models evolve with market conditions, maintaining accuracy and relevance.
Three Key Differentiators
The index stands apart from conventional market reports through three distinctive advantages:
- Predictive Power: Unlike backward-looking analyses, it forecasts future freight pricing trends, enabling proactive investment strategies.
- Segment-Specific Insights: Provides granular analysis across LTL, TL, and parcel shipping subcategories.
- AI/ML Integration: Represents the freight industry's first application of artificial intelligence and machine learning for predictive analytics.
AFS Logistics: From Data Custodian to Market Analyst
For AFS Logistics, the index marks a strategic transition from data processor to insights provider. The 39-year-old company, which manages $10 billion in freight audit and payment data annually, is now transforming this information into actionable market intelligence.
"Our analytics team has collaborated with Cowen to create what we believe is the industry's first forward-looking AI and ML freight index," said AFS CEO Tom Nightingale. "This allows us to convert raw data into meaningful information."
Investment Implications
Cowen emphasizes that in today's rapidly changing freight environment, tracking market performance has become essential for investment decisions. Jason Seidl, Cowen's Airfreight & Surface Transportation analyst, noted: "The index currently predicts, among other factors, that TL rates will reach new highs in Q4 2021, while LTL rates are expected to increase at an even greater magnitude."
Initial Findings: Market Signals
The inaugural index revealed several critical trends:
- Truckload: Composite TL per-mile rate index surged 15.2% in Q4.
- LTL: Average shipment weights have consistently declined since March 2021.
- Express Parcel: Both per-package rates and billed weights decreased in Q3.
- Ground Parcel: Ground parcel per-package rate index projected to reach record highs in Q2 2021.
Model Architecture
The predictive capability stems from a sophisticated framework incorporating:
- Historical freight data across modes and geographies
- Machine learning algorithms including time series analysis and neural networks
- Macroeconomic indicators (GDP growth, inflation, employment)
- Industry-specific factors (fuel prices, driver shortages, regulatory changes)
Through quarterly updates and continuous model optimization, the index maintains its predictive edge in an increasingly complex freight market.