What had started in US history as the means to link the east with the west, the Railroad Industry has become a critical aspect of the United States’ economy, and is one of its global competitive advantages. That trend continues as more investment is pouring into the railroad infrastructure. A recent Wall Street Journal report pointed out that railroads have spent $10 billion in upgrading and extending tracks since 2002, and will continue to invest another $12 billion.
From 1990 to 2000, railroads began to pick up steam again with an 3.6% annual growth rate. US Railroads transport 40% of all freight ton-miles (ton mile = one ton of freight shipped one mile). According to the Government Accountability Office (GAO), the volume of goods transported by railroads and trucks is expected to increase by 88% by 2035 from 2002 levels.
Per an earlier post, Coal is the largest commodity transported by rail in the U.S. accounting for approximately 40% of rail tonnage, and 20% of rail revenue. Farm and food products transported by railroad account for another 13% of rail freight and revenue. The demand for energy, metals and other commodities is driving increased forecasts of railroad use and may provide a potential investment opportunity. Warren Buffet has already spotted this trend and Berkshire Hathaway's holdings include a more than 18% stake in Burlington Northern . Billionaire investor Carl Icahn holdings include a 53.7% stake in American Railcar , a 9.5% stake Greenbrier and a smaller .7% stake in CSX Corp as of December 2007.
Some Railroad Benefits:
In 2008, Railroads are leading the S&P 500 Industrials with a year-to-date performance of 7%. Here are some leading Railroad companies by market cap ($M):
Some related areas of opportunity:
Most Rail Freight By million tones miles per year (The Economist):
United States 1,508,234
Sources: American Railroad Association, The Economist, The Wall Street Journal, and the Government Accountability Office