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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerWarren Buffett's recently announced investments in railroads have caused many to consider this sector. But with stock prices for rail operators up sharply since the news, investors might want to consider another track to invest in the sector.
Indeed, one advisor who was already riding the rail sector is Elliott Gue, contributing editor to Personal Finance newsletter, who recommends a trio of companies that make and lease railcars.
First up is American Railcar Industries (NSDQ: ARII). Gue notes that deliveries of is railcars soared 32% in the final quarter of 2006, primarily by sales of ethanol tankers.
He adds, "In addition to ethanol demand, there's a strong replacement cycle underway in the tanker car business. Specifically, new government safety requirements are forcing shippers to upgrade and replace their older carriers with safer models."
A second play on the sector is FreightCar America (NSDQ: RAIL), which Gue notes is the leading maker of coal cars in the US. He says, "The coal car business has been booming amid strong demand for coal and the need to replace an aging fleet of older railcars."
He also notes that newer aluminum railcars can carry the same loads but weigh a third less than traditional steel cars. As a result, he points out, this translates into major fuel savings for the rails."
Third on the list is Trinity Industries (NYSE: TRN). In addition to making railcars, Gue notes that Trinity also has a major leasing operation.
He explains, "Most railcars are actually owned by third-party leasing companies." And with a fleet of more than 85,000 railcars, he notes that Trinity is one of the largest railcar-leasing firms in the US.
For more stock picks from the leading financial newsletter advisors, visit Steven Halpern's free daily website, TheStockAdvisors.com.
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