Tonight, Cramer’s teaching Home Gamers how to make money off railroad stocks. Maybe it’s too late for that, you’re thinking. After all, Union Pacific is up 18% since Cramer bought it for his charitable trust on Jan. 23, and CSX is up over 40% since he gave it the nod back on July 25, 2006. But there are still a couple of undiscovered gems that have yet to be dug up.
Take Trinity, for instance, the largest manufacturer of railcars in the U.S. The stock is up 39% percent from where Cramer recommended it on Jan. 30, 2006. At first glance, TRN might look like a random collection of unrelated business, but a deeper look shows that it’s all about rails. Yes, it makes railcars, construction materials, river barges and energy equipment, but 56% of Trinity’s external revenues come from its rail businesses alone, and so does 71% of its operating profit. That’s a company that’s levered to rails.
Trinity makes every type of railcar on the tracks these days, so it’s not as vulnerable to cycles as other stocks in the sector. It makes the kinds of cars necessary to transport ethanol (ethanol corrodes pipelines), so Trinity will stand to gain from an overproduction of the alternative fuel. Also, Trinity makes wind towers, which could take off if business continues to “go green,” as Cramer thinks it will.
Bottom Line: If you want to play the rails but think they’ve already run too much, Trinity is worth a look. It’s where the newly rich railroads should spend their money.
Jim’s charitable trust owns Union Pacific.
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