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Nothing was spared the massive selling we saw over the past week, and the transports were a sector that had already started to come under pressure earlier in the year. The bottom line is fuel costs have plummeted, and that makes margins and earnings that much easier to achieve. Plus, most of the economic data has been positive, and that is directly correlated to the sector.

In a new research note, the UBS analysts liken the pullback this year to the one that happened in 2011 with the sense of multiple macro concerns driving a sharp pullback. The very positive gross domestic product and jobless claims numbers that have come out may help to soothe the concerns. Plus, they point out, especially in the railroad stocks, that they are much cheaper than the S&P industrials.

Here are the three stocks the UBS team is focused on as the best values to buy now.

FedEx

This top transport company may be eyeing a solid holiday season as falling gas prices boost consumers’ cash. FedEx Corp. (NYSE: FDX) provides transportation, e-commerce and business services in the United States and internationally. The company’s FedEx Express segment provides various shipping services for the delivery of packages and freight. The FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services and consolidates and delivers high volumes of low-weight and less time-sensitive business-to-consumer packages. The FedEx Freight segment offers less-than-truckload freight services, as well as freight-shipping services.

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The company is very levered to e-commerce growth, which continues to explode. It also is trading at a huge discount to the firm’s biggest rival, UPS. Analysts are estimating 20% earnings growth, and with a small 12 times earnings multiple, the stock is cheap.

FedEx investors are paid a small 0.7% dividend. The UBS price target for the stock is $195. The Thomson/First Call consensus target is $196.67. The stock closed Thursday at $153.04.
Kansas City Southern

This top rail stock has been hit hard this entire year and is very cheap. Kansas City Southern (NYSE: KSU) has railroad investments in the United States, Mexico and Panama. Its primary U.S. holding is Kansas City Southern Railway, serving the central and south central United States. Its international holdings include Kansas City Southern de Mexico, serving northeastern and central Mexico and the port cities of Lázaro Cárdenas, Tampico and Veracruz, as well as a 50% interest in Panama Canal Railway, providing ocean-to-ocean freight and passenger service along the Panama Canal.

Late in July, the company opened a Wylie, Texas, intermodal terminal that has an automated gate system with high definition imagers, optical character recognition and biometric driver identification. It also has an annual lift capacity of 342,000, 1,500 parking spaces and 400 container stack spots. The terminal also has enhanced traffic signals, specific turn lanes and two 5,000-foot intermodal tracks. The new terminal significantly increases the capacity previously available at the company’s Zacha (Dallas-area) terminal, creates opportunity for planned economic growth and development, and makes the City of Wylie and Collin County, Texas, even more competitive to shippers looking to locate new operations.

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Kansas City Southern investors are paid a 1.5% dividend. The UBS price objective is $111, and the consensus target is $104.61. Shares closed Thursday at $93.27, still way off the $125 highs of late last year.

Knight Transportation

This top transport stock is still down 25% from highs that were printed in March. Knight Transportation Inc. (NYSE: KNX) is a provider of multiple truckload transportation services using a nationwide network of service centers in the United States to serve customers throughout North America. In addition to operating one of the country’s largest tractor fleets, Knight also partners with third-party equipment providers to provide a broad range of truckload services to its customers. This is yet another top stock that could benefit big from an improving domestic economy.

The company posted very solid second-quarter earnings that were ahead of Wall Street expectations. While overall revenue came in below the analysts’ numbers, the earnings-per-share figure of $0.39 came in above consensus estimates.

Knight investors are paid a small 0.91% dividend. The UBS price target is $33 and the consensus is set at $32.28. The stock closed Thursday at $26.81.

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Not only did these top transports get stung in the recent market sell-off, they have been getting hit all year long. From a bounce-back perspective, they may offer investors a better opportunity than some of the other sectors that got hit recently. Plus these stocks are all suitable for growth accounts with a degree of risk tolerance.