Posted on 04/17/2008 5:58:45 PM PDT by Lorianne
Want to invest in a green industry that employs the latest technology, reduces U.S. oil consumption and is priced very attractively? Look no further than the railroads. Laggards for decades after the 19th-century boom ended, they're hot again.
"There was steady traffic growth until last year, and the trend looks good once the economy gets back up to speed," says Kenneth Kremar, an economist who follows the railroad industry for consulting firm Global Insight. Perhaps that's why railroad stocks have largely escaped the battering that other sectors have taken so far this year.
Of course, their business could still be hurt temporarily if the economy deteriorates further. But eventually, says Kremar, "we'll see a pickup in demand, especially in the kinds of commodities railroads carry."
Astute investors are climbing aboard. Warren Buffett has been loading up on shares of Burlington Northern Santa Fe and was buying in January at prices only 13% below current levels. (News of his buying boosted the stock.) At last count, he owned more than 18% of the company.
Sivy 70: Top stocks from top industries The chief reason that the railroads' long-term prospects look so good today is that they began upgrading their operations soon after the industry was largely deregulated in 1980. "The railroads finally had an incentive, as well as the cash flow, to reinvest," says Robert E. Gallamore, a former Union Pacific executive and former director of the Transportation Center at Northwestern University.
(Excerpt) Read more at money.cnn.com ...
Trains = Chinese trade conduits
Any means of transportation = Chinese trade conduits
Don’t buy Chinese goods, then.
Time to get some Ching Ching in the Choo Choo's.
Paging Willie Green...
actually it is not so suprising. Multimodal transportation has really be growing. The real change has been the collapse of the unions. You now have the containerization of train transport which parallels ship transport. Notice how box cars are a disappearing phenomenon.
Now we just need trucking to fully containerize and we have lower costs.
I miss cabooses.
I hadn't noticed.
I did notice 142 boxcars all at once several years back....
My impression the past few years is that trains are being packed with coal.
Too bad America has lost over 50% of the rail lines we once had. With fuel prices skyrocketing trucking is becoming too expensive for the long haul.
I see a lot of coal and fertilizer, and grain and ethanol moving by rail. Sounds like a good investment.
The missing 50% either did not earn their keep or lost money for the railroads when the railroads were forced by Government fiat to keep them.
After deregulation,those lines that were marginalable to be sold to Short Lines that are able to operate them for less, thus the Short Lines are able to make money.
What lines are left, and being operated by the Class Is are being improved.
BNSF is double-tracking the last remaining segment of their Southern Route thru New Mexico. When completed, it will more than double the capacity of the line.
Union Pacific has been adding more tracks to it route thru Nebraska and Kansas, increasing it's capacity.
Without the government regulation of route and rates, the railroads are able to price their services as the business allows, rather than go thru a government hearing that took sometimes years.
All four major roads, BNSF, UP CSX and NS are upgrading their facilities to handle an ever increasing traffic load.
It’s not merely coal, of course; there are other goods being shipped by rail. Furthermore, not all that coal is going to China. There are power plants near Washington, D.C., for example, that burn coal, although with much cleaner technology than the cost-sensitive Chinese use.
A highly efficient rail network carrying freight through the U.S. is good for the country’s economy in that it lowers shipping costs, especially with high fuel prices.
I worked for the Milwaukee Road back in the late 70’s early 80’s. they were coming out of bankruptcy. Tracks were limited to 10mph in many areas. We worked hard to bring the track up to a 30 mph speed. After 3 years it was up to 50. They spent millions of dollars upgrading. For a time they were merged with the GTR (Grand Trunk) and now I have no idea who owns the company. But they had a key line from KC to Chicago that survived over a parallel Rock Island line that was just 20 miles west but ended up in the same place side by side.
The trains roll through that area now where I used to live on first class tracks moving a lot of freight. We took pride in bringing back the Milwaukee Line from bankruptcy to preserve the vital line. Sadly, some sections of track did not survive and many small towns lost the rail spur to the local grainery. Trucking was cheaper at the time. But now trucks are not nearly as economical. But the small towns without rail access are getting hit because trucks are the only option they have. It is unfortunate but that is economics as it was 30 years ago compared to now.
Deregulation has been good. But the government put up hundreds of millions of dollars propping up many railroads. Maybe the payback to the economy will return to us?
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