|New Threads Only:|
|New Threads & Replies:|
Forum List » Guru News and Commentaries|
Guru News, Stock picks and commentaries
Trinity Industries: They've Been Workin' on the Railcars
Posted by: Joseph L Shaefer (IP Logged)
Date: October 25, 2013 10:05AM
Levi Strauss couldn't make a dime as a miner. But he made a lasting fortune selling denim tents and denim work clothes to the miners. Whether they struck it rich or died dirt poor, Levi still made the same amount of money from each of them. Ka-ching, ka-ching!
Trinity Industries (TRN) is a market leader in five key industries, all of which come together at the nexus of extractive energy, infrastructure and transportation.
Trinity builds more railcars than any other company in America at a time when politically caused delays in pipeline construction are forcing energy companies to turn increasingly to rail to deliver their product. TRN also leases and manages more railcars than any other company in America: just under 73,000. The company is also a huge manufacturer of inland river barges, one of the cheapest means of transporting large amounts of product long distances. It is the largest maker of highway guardrails and crash cushions, and one of the biggest makers of structural wind towers. These are some sweet, sweet spots to be in these days!
The two rail segments are the largest pieces of the company, enjoying a 25% revenue increase over this past year and a 54% increase in earnings. Together they account for 60% of company revenue, but TRN is a well-balanced manufacturer that can switch from producing one product to another with remarkable alacrity if the supply/demand matrix changes. In the 12 months ending May 2013, Trinity took orders for 36,600 railcars; that amounts to 51% of all the railcar orders in America. The value of the company's backlog of orders totaled $5.1 billion, a new all-time high.
(click to enlarge)
Things are looking great for the inland barge subsidiary, as well. Over the last decade, 1,000 more barges were scrapped than were built. And today some 23% of hopper barges (which transport grain and coal) are more than 20 years old while 34% of tank barges (which transport liquids) are more than 20 years old.
As part of their construction portfolio, TRN also produces and distributes various aggregates (rock, whether whole, crushed, graveled, sand, or whatever). Aggregates are a very regional business; it costs a lot of money to transport something as heavy as rock, so where your aggregate is located counts for a lot. Owning a massive pile of rock outside Detroit, for instance, may not yield much profit since there isn't currently a lot of infrastructure building there. But Trinity is the biggest producer and distributor in Texas, the fastest growing state for such products.
(click to enlarge)
Wind towers and tanks (containers, not military armored) make up the last piece of the Trinity pie, a smaller piece but an important one for steady cash flow. I see this company as the epitome of American manufacturing: big, ugly, well-built workhorses to keep the rest of American industry moving, building and powering up. The stock can be purchased today at 12.5 times earnings, 1.6 times book and 1 times sales. Levi Strauss would be proud of them!
THE FINE PRINT: As Registered Investment Advisors, we see it as our responsibility to advise the following: we do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.
Past performance is no guarantee of future results, rather an obvious statement but clearly too often unheeded judging by the number of investors who buy the current #1 mutual fund only to watch it plummet next month.
We encourage you to do your own research on individual issues we recommend for your analysis to see if they might be of value in your own investing. We take our responsibility to proffer intelligent commentary seriously, but it should not be assumed that investing in any securities we are investing in will always be profitable. We do our best to get it right, and we "eat our own cooking," but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.
Stocks Discussed: TRN,