ERIC BARDEN
PORTFOLIO MANAGER
TEXAS CAPITAL VALUE AND GROWTH FUND

COMPANY: Celadon Group
TICKER: CLDN (Nasdaq)
PRICE: $22.64 (as of 4 p.m. yesterday)
52-WEEK RANGE: $10.53-$24.99
MARKET CAPITALIZATION: $343.7 million

Eric Barden is a portfolio manager at the Texas Capital Value and Growth Fund. Celadon Group is a trucking services company. Mr. Barden spoke to David Dalley of The New York Sun about why he believes that the stock could increase by more than 75% by the end of next year.

What does Celadon do?

They provide trucking between the U.S., Mexico, and Canada. They’re one of the few operators that are licensed in all of the North American free-trade countries. They truck pretty much everything.

Why do you like it?

The business has benefited from increased trade between the U.S. and Mexico. A lot of similar trucking companies need to change carriers at the border because they’re not licensed in both countries. That causes delays. In a ‘just in time’ inventory world, where transit time is key, Celadon has a huge advantage to domestic truckers. They’re seeing better earnings growth right now than any other trucking company.

What are the fundamentals like?

They’re experiencing explosive earnings growth. Analysts are looking at a long-term growth rate of 25% to 30%. Five-year historic growth is at 58% (annualized). It’s also a reactive stock in that it follows the earnings trend line. Sometimes stocks will anticipate future growth. In Celadon’s case, the price is going up in line with earnings growth.

Even though its stock price has quadrupled since 2003, the price is primarily driven by its earnings growth (as opposed to valuation expansions). That’s what we’re looking for – companies we can hold for a while and see good appreciation based on robust earnings growth. The stock price can barely keep up with earnings right now. The P/E is currently at about 20, which is in line with historic averages.

What will drive growth going forward?

It’s all about free trade. As long as trade continues to grow between Mexico and the U.S., this company’s earnings will do just fine. And by extension, that’s the biggest risk to future earnings. If we became more protectionist, then this company would be in trouble. It’s a Nafta play.

Where do you see the stock price going?

For the year ending December 2006, I think it could trade in excess of $27 or $28.And I think that it could be as high as $40 by year-end 2007.