High-Speed Rail Rallies Stocks
Before you’re able to pick up your groceries, farmers must load their produce onto railcars operated by Union Pacific, Norfolk Southern, and CSX. Those cars rattle their way down hundreds of miles of track before a trucking company like J B Hunt goes the “final mile” to a factory, possibly a warehouse, and eventually your local Walmart.
This is the transportation industry. The cargo’s the customer, so when farmers and their commodities are doing well in a booming economy, railroaders and truckers are typically doing well.
Yesterday, the Association of American Railroads (AAR) published its annual report for investors. It earmarked a “lousy January” as Trump’s trade wars reduced grain shipments by 11.6%, and the banishing of coal reduced coal shipments by 14%. Twenty thousand railway workers lost their jobs last year, the most since the Great Recession. All this, and yet railroad stocks still hurtle forward. How?
Industry executives have managed to buoy the market by integrating Precision Scheduled Railroading (PSR) on top of many other new technologies. For a business that has barely changed since Vanderbilt, but also barely slept, these changes are long overdue and will lead to “faster trains and fewer workers.”
Low interest rates have allowed stodgy utility stocks to shift into high-octane, and now boring old railroads could be next to adopt some rare growth traits. Things can only get better on the trade front as the White House finalizes a ‘Phase 1’ deal with China, and the consumer continues calling for “more, more, more!” All aboard!
