Trinity Industries (TRN-N)

It is the ultimate in an economic cycle trade. It is a value trap depending on your timing. It is too early. Wait for the bottom of the next economic cycle. It is too early to buy.

Rail car manufacturer. It is important to recognize market demand on this type of company. Right now rails are having a really tough time. Their investment cycle has slowed. It is unlikely to turn dramatically and quickly. Feels there are greener pastures in the meantime.

When you have the whole US$ situation, this was attractive, because it is very domestic. Found the profit margins were getting difficult in this space, so he moved into the actual rail companies. Very attractive and very, very good valuation.

(A Top Pick Aug 13/14. Down 34.92%.) Railcar manufacturer. The big demand for rail cars was for crude oil. He was optimistic about new standards coming out to make them safer. 2 stories that hurt the business was the decline in crude production and the delay in coming out with new standards. Sold his holdings. He is not optimistic on this.

One of the biggest in rail cars, barges also. The stock did really well as the demand for oil to be shipped by rail was growing. Then there was safety issues with existing cars, then the price of oil came down and not as much was shipped, and one of their smaller divisions makes highway barriers and they put out some that are not up to snuff and you die if you hit them. There are lots of law suits out there.

These are always tough stocks to invest in, because you have to predict what is going to happen, the demand, the backlog, etc. He prefers more predictable industries. There is some question as to how much more demand there is going to be with oil at these levels. Too hard to figure out.

Builds tanker and freight cars. Had looked at this because of its oil by rail. Doesn’t think it is totally dead. Volumes will decline, but he wouldn’t sell the stock because of fears of what might happen. He is following this one closely.

This has been beaten up as of recent, simply because of the oil decline. It has some exposure to the energy trade. Had a huge drawdown in the last half of this year, when it is usually positive. It is not working in its period of seasonal strength and something you should stay away from.

He likes the rail car making business. He is looking at it. It is cheap. On a macro basis, this industry is very favourable.

This is very much in the supply mode for freight cars and all sorts of rail equipment. This and Wabtec (WAB-N) are the 2 preferred ways of playing this sector. Many analysts are showing growth for this particular company. Until he can get a better handle on what the growth might be, he’ll stay away from this and stay with Wabtec.

(Top Pick Aug 28/13, Up 128.73%) Crude by rail. 20% of crude moves by rail. They are buying other companies in LNG and storage because crude by rail will not go to 50% so it will slow.

In the sweet spot of making rail cars and rail tanker cars, which is huge. There is a whole generation of cars to be replaced.

One of the largest makers of railcars in the US. Traditionally a fairly cyclical business. His view is that the industry has really changed for a couple of reasons. There are so many more uses for rail. We now have oil and fracing sand. All of this has been extending the life of the cycle and he thinks they are going to run higher and higher earnings. With the money they are generating and the cash flow yield, they have been diversifying, such as tanks for LNG. Still trading at 7-10 times earnings and would be going to more of a 12-15 times. Yield of 0.91%.

Manufactures rail cars. That is a good business normally, but these days it is a fantastic business because of big demand for grain cars and a bigger demand for cars for oil. There is going to be even bigger demand because all the old single walled cars are going to be taken out of service, and have to be replaced by double walled cars. That is going to have to be a benefit to them.

Manufactures rail cars and has a lot of infrastructure as well. A lot of their revenues are coming out of Mexico so it is going to be Mexican economy dependent. The government is starting to spend more money on expenditures and infrastructure which is right into their sweet spot. Debt is a little high at around 110% of equity, but they are generating really good cash flow and the dividends are growing. Doesn’t think it is overpriced. Could come down with the market.