To some people, railroads seem like an artifact in a world of rapidly increasing means for transportation. To those people, I say, I believe you are underestimating the importance of railroads.
Railroads may not be transporting people place to place like they were in the Industrial Revolution, but they remain key components in transporting goods. Due to their stable infrastructure, consistent dividends, and limited competition, they are generally thought of as low-risk investments.
Some of the best rolling stock options are railroad stocks. They offer stability in an otherwise risky investing climate. Here’s why.
What is Rolling Stock?
Rolling stock is defined by the Federal Transit Administration (FTA) as: “transit vehicles such as buses, vans, cars, railcars, locomotives, trolley cars and buses, and ferry boats, as well as vehicles used for support services.”
So how do you decide which rolling stock to invest in? Well, there are a few different approaches to rolling stock, but a tried and true option is railroads.
Infrastructure
Think about it, what else can transport that much product across a continent? What else has that sort of infrastructural integrity? Sure, semi trucks come to mind because they generally travel faster, but when fuel prices are high, railroads have the upper hand.
Rolling stocks shouldn’t be your flash-in-the-pan stock choice. They should be your rock. Trucks make sense, but railroads have been around longer. Because they have been around longer, they are more dependable.
In a world that sorely lacks the infrastructural systems that railroads provide, it’s no wonder why they’re so highly recommended.
Cost
It’s simple economics. Why pay more to move your goods with a truck?
Railroads are the most cost-effective rolling stock out there. Furthermore, the trucking industry (railroad’s biggest competitor) is currently experiencing a shortage of drivers. That means you’ll have to pay higher premiums. Is it really worth it?
The Best Railroad Stocks
You’re trying to invest intelligently and manage your risk wisely. The best railroad stocks will offer you that peace of mind.
American Railcar Industries- The leader in hopper and tank cars. The company also has a very diverse range of services they provide. New federal tanker regulations bode well for them.
Kansas City Southern- New management has streamlined the company into a major player. The company is also in the center of key industrial relations between Mexico and the U.S.
Union Pacific- The largest railroad in the nation and diversified strengths in the market. They have proven themselves over a long period of time.
Railroads: A Thing of the Past and the Future
There’s a reason why railroad companies have survived for so long: they understand their place in the market and they play to their strengths. One of those strengths is sound management. They know how to keep costs low and make a profit over a long period of time.
You should take a page out of their book. While investing, it’s easy to get caught up in the Apples and Amazons. But those stocks are hit and miss. Whether you’re just starting your portfolio, or you’ve been investing for a long time, it’s nice to have something dependable like a solid rolling stock.
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