Don’t Watch The Train Go By…
I was lying on the couch the other night and… POW, a revelation!
One day this economic nightmare will come to an end. The dust will settle and the economy will start growing again.
In a moment, I’m going to tell you about a company poised to cash in on this trend. But first, a little background…
As the economy emerges from the abyss, savvy investors will start opening their eyes. New money making opportunities will be foremost on their minds.
We’ll see investors beginning to develop an appetite for growth. They’ll start rotating their money out of safe haven investments and into sectors offering stronger growth opportunities.
This type of rotation is nothing new. Sector rotation is the natural progression when the economy begins moving from slow growth towards full recovery.
Two sectors poised to outperform are basic materials and industrials.
Think about it… as economic growth picks up, we should see an uptick in construction and homebuilding. And we should see steady increases in manufacturing and production.
These trends will obviously increase demand for commodities like steel, aluminum, lumber, and cotton, just to name a few. These are critical raw materials needed to support economic growth.
Here’s the key… when economic growth picks up, transportation companies will see a return to boom times. As a result, I’m officially bullish on stuff that moves.
You see… someone’s going to have to haul these commodities all over the country. So, who stands to benefit the most? You guessed it… the railroads.
Kansas City Southern (KSU) is my favorite railroad. This is a name you’re going to want to own.
Kansas City Southern is a holding company with railroad investments in central and southern parts of the United States. More importantly… they are one of just a few railroads operating from northeastern and central Mexico all the way down to Panama.
KSU is a gem. During the economic crisis and downturn, KSU has clearly outperformed the S&P 500. In fact, during the past three years, KSU is up 55% compared to the S&P’s 14% return.
Imagine the money to be made on this company as the economy continues to grow!
One big growth driver is the company’s Mexican operations.
You see, last year Chrysler announced they’re going to open their sixth manufacturing plant in Saltillo, Mexico. The new factory solidifies Saltillo’s status as the country’s premier automotive manufacturing hub.
And KSU is the major railway operator servicing this new industrial center.
But wait, it gets even better…
The company’s financials are in great shape…
For the first nine months of 2011, Kansas City Southern showed revenue up an amazing 24% to $544 million. In addition, analysts are expecting revenue growth of 10% in 2012. This robust growth is due to increased shipment volumes as well as additional shipment ports.
The company’s earnings are growing rapidly as well. Over the first nine months, KSU earned $2.13 a share versus $1.04 a year ago. That’s an impressive 100% increase year over year! What’s more, earnings for all of 2011 are expected to surge 68% to a whopping $2.81 a share.
So, where does this leave us?
It’s crystal clear that Kansas City Southern is a great company to own in these rough economic times. I can only imagine what it’s capable of doing under normal market conditions. I don’t think you could ask for a better long term company as the economy begins the healing process.
Category: Stocks
