I got curious about the railroad business when Buffett bought Burlington Northern Santa Fe (BNSF). Westinghouse Air Brake Technologies Corp. (WAB) was also doing very well as was Canadian National Railway Company (CNI).
I did a writeup on Genesee & Wyoming over a year go but I can’t find it. They are in the short haul business which is very fragmented and their modus operandi is, precisely, to consolidate the industry by buying local lines. This is a great business model while they are growing so it’s not a buy and hold forever kind of stock. Back when I did the writeup I figured out how much of the industry they had acquired to see if it still was a great deal. They had something like 10 to 15% but have since then acquired at least two additional North American lines. Based on the rate of the acquisitions I figured the growth story was good for at least another ten years (all these numbers are approximate because it’s just what I remember).
The reason for not buying back then was that a commodity down cycle had begun negatively impacting their earnings. Time to wait for the turnaround which might be now.
I found several of my GWR posts, in chronological order:
1/15/2016: The economy by the carload
http://discussion.fool.com/the-economy-by-the-carload-32073276.a…
6/10/2016: GWR Reports Traffic for May 2016
http://discussion.fool.com/gwr-reports-traffic-for-may-2016-3227…
10/13/2016: GWR carloads keeps going down
http://discussion.fool.com/gwr-carloads-keeps-going-down-3243211…
11/11/2016: GWR: Carloads continue to fall
http://discussion.fool.com/gwr-carloads-continue-to-fall-3247445…
In the last one (today’s) I make the case that it might be turnaround time.
What do you guys think?
Denny Schlesinger