For all the talk about greener transportation initiatives, the answer may actually lie not in a new-fangled venture, but in a network thatâs more than 200 years old.
Iâm talking about the rail system â a $78 billion per year industry.
And right off the bat, it boasts three major advantages over the trucking and shipping industries:
The industry has also drawn the attention of the worldâs greatest value investorâŚ
Follow the Lead of the Worldâs Greatest Investor
Warren Buffett has poured billions into the railroad industry over the last several years. Citing railwaysâ cost-effective and environmentally friendly operations, he referred to his investment as âa bet on the countryâŚâ
âI believe that this country will prosper and youâll have more people moving more goods 10, 20, 30 years from now and the rails should benefit,â he said in an interview last fall. It was around the same time that Buffett went âall inâ and bought one of the nationâs largest railroads for $34 billion.
Not surprisingly, less than a year later, the railway business started to pick up. By August 2010, average carload volumes reached a two-year high. And weekly intermodal traffic â the interchange of cargo from train to ship or truck â is up 20% year-over-year.
Then on October 13, the overall industry nudged up 4%. And leading the charge was a Jacksonville railroad firm whose tracks cover more than two-thirds of the United StatesâŚ
Strong Business Growth and Lower Costs Give CSX Corp a 43% Income Boost
CSX Corporationâs (CSX, Financial) shares are up to $61.67 (as of November 1) â an increase of 7.7% since it released its third quarter results on October 12. And up 44% from just one year ago.
As the first railroad company to announce earnings, CSX often sets the tone for the rest of the industry. And in this case, itâs great news, since the companyâs quarterly net income rose by 43%.
The extra cash is allowing CSX to prepare for even more growth. By the end of 2011, it will add 5,000 more employees. It will also repurchase $646 million in shares and is set to increase its dividend.
But CSX isnât the only rail company enjoying a steady rise in business. Strong sales have lifted shares of one freight car manufacturer by 18% to a two-year highâŚ
Greenbrierâs Business Explodes as Railways Rally
Headquartered in Lake Oswego, Oregon, The Greenbrier Companies (GBX, Financial) have built and sold railcars for four decades.
However, the recession hit the transportation sector harder than most others and by early 2009, Greenbrierâs orders had slumped to their lowest level since the 1980s. And a significant decrease in cargo resulted in a $30 million revenue loss.
But thanks to a rebounding economy, business has risen in 2010. As of October, weekly rail volume had increased by 11.5% year-over-year, estimated at 34.8 billion ton-miles.
In addition, on August 25, Greenbrier also announced that it had received orders for more than 1,700 new units. The deal, worth $130 million, will allow the firm to hire 260 new workers. But it was just the beginningâŚ
Greenbrier followed that up on September 27 by announcing another set of orders, this time worth $200 million. Shares have soared by 85.5% since the two announcements. But seeing as Greenbrierâs success depends on railroads like CSX, itâs really great news for the industry as a wholeâŚ
As the Economy Recovers, the Railroad Industry Will Tag Along for the Ride
The future is looking brighter for the railroad industry.
Shipments of agricultural equipment, metal, and energy products are nearing pre-recession levels. Motor vehicle shipments are up to 813,863 so far this year, compared with 617,171 a year ago. And strong demand for coal is driving industrial business, too.
As a result, rail car orders are up. As the economy recovers, the railroad industry actually finds itself in a better position. Rail is by far the cheapest and most reliable option when it comes to transporting goods. Yet because operating costs are so low, the industry averages some of the highest profits.
Over the next few years, Buffettâs âbet on the countryâ should really pay off⌠both for him and for investors smart enough to follow his trail.
Good investing,
Alexander Moschina
http://www.investmentu.com/
Iâm talking about the rail system â a $78 billion per year industry.
And right off the bat, it boasts three major advantages over the trucking and shipping industries:
- Itâs cheaper.
- It has higher profit margins.
- Itâs on the verge of a major comeback, with railroad companies having plowed more than $42 billion since 2008 to upgrade their operations and technology.
The industry has also drawn the attention of the worldâs greatest value investorâŚ
Follow the Lead of the Worldâs Greatest Investor
Warren Buffett has poured billions into the railroad industry over the last several years. Citing railwaysâ cost-effective and environmentally friendly operations, he referred to his investment as âa bet on the countryâŚâ
âI believe that this country will prosper and youâll have more people moving more goods 10, 20, 30 years from now and the rails should benefit,â he said in an interview last fall. It was around the same time that Buffett went âall inâ and bought one of the nationâs largest railroads for $34 billion.
Not surprisingly, less than a year later, the railway business started to pick up. By August 2010, average carload volumes reached a two-year high. And weekly intermodal traffic â the interchange of cargo from train to ship or truck â is up 20% year-over-year.
Then on October 13, the overall industry nudged up 4%. And leading the charge was a Jacksonville railroad firm whose tracks cover more than two-thirds of the United StatesâŚ
Strong Business Growth and Lower Costs Give CSX Corp a 43% Income Boost
CSX Corporationâs (CSX, Financial) shares are up to $61.67 (as of November 1) â an increase of 7.7% since it released its third quarter results on October 12. And up 44% from just one year ago.
As the first railroad company to announce earnings, CSX often sets the tone for the rest of the industry. And in this case, itâs great news, since the companyâs quarterly net income rose by 43%.
The extra cash is allowing CSX to prepare for even more growth. By the end of 2011, it will add 5,000 more employees. It will also repurchase $646 million in shares and is set to increase its dividend.
But CSX isnât the only rail company enjoying a steady rise in business. Strong sales have lifted shares of one freight car manufacturer by 18% to a two-year highâŚ
Greenbrierâs Business Explodes as Railways Rally
Headquartered in Lake Oswego, Oregon, The Greenbrier Companies (GBX, Financial) have built and sold railcars for four decades.
However, the recession hit the transportation sector harder than most others and by early 2009, Greenbrierâs orders had slumped to their lowest level since the 1980s. And a significant decrease in cargo resulted in a $30 million revenue loss.
But thanks to a rebounding economy, business has risen in 2010. As of October, weekly rail volume had increased by 11.5% year-over-year, estimated at 34.8 billion ton-miles.
In addition, on August 25, Greenbrier also announced that it had received orders for more than 1,700 new units. The deal, worth $130 million, will allow the firm to hire 260 new workers. But it was just the beginningâŚ
Greenbrier followed that up on September 27 by announcing another set of orders, this time worth $200 million. Shares have soared by 85.5% since the two announcements. But seeing as Greenbrierâs success depends on railroads like CSX, itâs really great news for the industry as a wholeâŚ
As the Economy Recovers, the Railroad Industry Will Tag Along for the Ride
The future is looking brighter for the railroad industry.
Shipments of agricultural equipment, metal, and energy products are nearing pre-recession levels. Motor vehicle shipments are up to 813,863 so far this year, compared with 617,171 a year ago. And strong demand for coal is driving industrial business, too.
As a result, rail car orders are up. As the economy recovers, the railroad industry actually finds itself in a better position. Rail is by far the cheapest and most reliable option when it comes to transporting goods. Yet because operating costs are so low, the industry averages some of the highest profits.
Over the next few years, Buffettâs âbet on the countryâ should really pay off⌠both for him and for investors smart enough to follow his trail.
Good investing,
Alexander Moschina
http://www.investmentu.com/
