Best of the Week
Most Popular
1.China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015? - Nadeem_Walayat
2.Gold Price Awaiting Outcome of Greece Crisis - Clive_Maund
3.Gold Price Peculiar 6 Month Cycles - Rambus_Chartology
4.Gold Price Just a Little Bit More - Bob_Loukas
5.8 Unprecedented Extremes Indicate a Stock Market Bubble in Trouble - EWI
6.Gold And Silver – Without Either, You Will Be Greeced - Michael_Noonan
7.Lies, Damned Lies and Statistics - James_Quinn
8.China Crash, Greece Crisis Harbingers of Stocks Bear Market? Video - Nadeem_Walayat
9.Gold and Silver Record Shorting - Zeal_LLC
10.Markets Big Deflationary Downwave Quick Reference Guide... - Clive_Maund
Last 5 days
Will Crude Oil Price Decline Continue? -Video - 28th July 15
Gold & Silver Money Has Devolved Into Debt and Plastic - 28th July 15
Buy and "Own Gold Krugerrands" Says Money Expert Jim Grant, Very Bullish on Gold - 28th July 15
How to Protect Yourself from China's Crashing Stock Market - 28th July 15
Quantum Geopolitics - 28th July 15
Gold Mining Stocks to Weather the Storm - 28th July 15
Stock Market Bulls Beware! - 28th July 15
Will Chinese Stock Market Crash Affect the US? - 27th July 15
Crude Oil Price Under $48! - 27th July 15
Are We Seeing a Trend Reversal with U.S. Interest Rates? - 27th July 15
How to Know When the Gold Bear Market is Over - 27th July 15
Gold Bear Market Phase III - 27th July 15
Silver Bull Hammer Buy Signal - 27th July 15
Gold Cracks Support and Plunges to New Lows - How Low Will Price Go? - 27th July 15
Commodity Markets Breakdown Of 2015 Is Now A Fact - 26th July 15
Gold Price at a Five-Year Low: Here’s What to Do - 26th July 15
Stock Market Primary III Inflection Point - 26th July 15
Central Banks and Our Dysfunctional Gold Markets - 25th July 15
Gold And Silver - The US Dollar Does Not Exist, Part II - 25th July 15
How Wall Street Put Apple Stock in Animal House - 25th July 15
How to Trade Markets Using the Stochastic Oscillator - Video - 24th July 15
A Bond Market Crisis Is Coming... Here's What to Do - 24th July 15
Why There's Resistance to the Iran Nuclear Deal - 24th July 15
Absurd Gold Stock Levels - 24th July 15
Gold Mining Stocks Nearing Rebound - 24th July 15
Misperceptions Create Significant Bond Market Value - 24th July 15
Commodities Distressed Investing - 24th July 15
OPEC Shorts Are Driving Down the Crude Oil Price - 24th July 15
USD Index Rebounds - 24th July 15
If You’re Worried About a Tech Bubble, You’re Focusing on the Wrong Thing - 24th July 15
Gold Stocks Bear Market Bottom Buying Opportunity? - Video
The Stealth War on the United States - 23rd July 15
Commodity Prices, Gold and Silver Stocks Next Leg Down - 23rd July 15
The ‘Real’ Reason the Fed Wants to Raise Interest Rates - 23rd July 15
Crude Oil Price Slump is a Once in a Decade Opportunity to Make Money, Guaranteed - 23rd July 15
Gold Price Hits a 5-Year Low: How to Time the Next MAJOR Bottom - 22nd July 15
Silver and the Deflation Thesis - 22nd July 15
Gold Price Crash - Trend Forecast 2015, Gold Stocks Buying Opportunity? - 22nd July 15
The Three Reasons Behind Iran’s Resistance to the Nuclear Deal - 22nd July 15
Winning the Hunger Games - How to Choose Successful Agriculture Investments - 22nd July 15
Are Free Markets The Solution? - 22nd July 15
Gold Hammered “Unprecedented Attack” - 21st July 15
The Turkish Enigma - 21st July 15
Gold and Silver: The Final Capitulation Commences - 21st July 15
Greater Israel Setback from Iranian Nuclear Agreement - 21st July 15
U.S. Housing Market: Is the Roof About to Cave In (Again)? - 21st July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stock Market Bubble in Trouble

China Year of the Snake… U.S. Year of the Tank Car

Companies / Sector Analysis Feb 13, 2013 - 08:45 AM GMT

By: Investment_U

Companies

David Fessler writes: In China, 2013 is the Year of the Snake. According to the website HanBan.com, this means that 2013 should be a year of steady progress and attention to detail. Focus and discipline will be necessary in order to achieve goals.

In the U.S., 2013 might well be called the Year of the Tanker Car, particularly if you are an oil producer in the Bakken or the Eagle Ford shale formations.


If you happen to live near a major rail line in Texas or the Dakotas, you’ve probably seen a train like the one below. It’s what’s known as a “unit train”. A unit train transports a single product or unit.

Photo courtesy of Dakota Plains Holdings, Inc.
In this case, the Canadian Pacific Railway engines are pulling tanker cars full of crude oil. They were loaded at the Dakota Plains Holdings, Inc. (NASDAQ:DAKP) transloading facility in New Town, North Dakota.

New Town just happens to be in the heart of the Williston Basin, also called the Bakken shale oil field. But the engines (if it wasn’t for the snow) could just as easily be Union Pacific Corporation’s (NYSE:UNP). The tanker cars could also just as easily be from a transloading facility in Texas’ Eagle Ford shale oil field.

Regardless, you can expect to see more unit trains like this one… a lot more. Crude oil from U.S. shale deposits is being pumped out of the ground in ever-increasing volumes. It has now outstripped the ability of existing pipelines to carry it.

Historically, 90% of crude oil shipments have been transported around the U.S. via pipelines. In the case of the Bakken, there are few existing pipelines. A number of new ones are in the planning stages, but they can take years to build.

East and Gulf coast refineries would love to get their hands on the inexpensive West Texas Intermediate (WTI) crude. They’re currently forced to pay the higher prices for the internationally priced Brent. It can sell for as much as $25 per barrel more than WTI.

That big differential between Brent and WTI has made crude transportation via rail very attractive. Right now, the only economically viable way to get this surplus crude from fields to refineries on the East and Gulf coasts is by rail.

Crude oil trains have been increasing in number since the BNSF Railway pulled the first one from EOG Resources, Inc.’s (NYSE:EOG) Stanley, North Dakota Terminal.

As you can see from the graph below, courtesy of the Energy Information Administration (EIA), tanker car shipments have dramatically increased in just the last year.

2012 saw a record increase in crude oil production, and a marked decrease in coal use. This is reflected in the movement of these two commodities by rail. Crude oil and related products were responsible for the largest increase in commodity rail car loadings in 2012.

Not surprisingly, coal had the largest decline. This was due to increased use of natural gas for power generation. However, coal is still king of carload shipments. It accounted for 41% of all carloads. This compares to 4% for all petroleum products combined.

It’s the growth of petroleum that’s absolutely stunning. In 2009, crude oil and related products made up just 3% of all carloads in the oil and petroleum products class. In 2012, that number jumped to 38%. The Association of American Railroads reported that nearly 171,000 carloads of crude were moved by rail in 2012.

Playing the Rail-Crude Connection
There are several ways for investors to play the oversupply of WTI crude. The most obvious would be an investment in one of the major rail carriers serving the Bakken or the Eagle Ford shale oil fields. But rail stocks carry a wide range of commodities.

Most major railroads haul coal. Many will be hard pressed to offset the drop in coal shipments as natural gas is the fuel of choice for new power plants.

A more subtle way to play the increase in crude shipments by rail is by investing in tank car manufacturers. Right now, there is a backlog of 40,000 tank cars on order from the top three manufacturers. If you order a tank car today, you’ll wait 18 months to take delivery.

The Union Tank Car Company is a privately held subsidiary of Marmon Holdings. Marmon is owned by Berkshire Hathaway Inc. (NYSE:BRK.A), Warren Buffet’s empire. Union is working flat out to meet its tank car order commitments.

A better way to play
the tank car boom would be to invest in a few shares of Trinity Industries, Inc. (NYSE: TRN). It sells a wide range of products, including wind towers, tanks and rail cars. One of its divisions also operates a barge leasing business.

Trinity’s rail car business is doing extremely well. So well, in fact, that it’s currently in the process of converting several wind tower manufacturing plants into rail tank car manufacturing facilities.

But the best tank car manufacturing play of all is going through the roof. Its manufacturing capacity is sold out through the end of 2014. This company’s stock is up 38% in a little over five months.

They’ll be announcing earnings in the next several weeks. I expect them to exceed analysts’ estimates for the coming quarter and likely for the rest of this year and next. Out of respect for my existing subscribers, I can’t give you the name of this company.

My Peak Energy Strategist newsletter contains the name of this tank car manufacturing powerhouse, along with a number of other great energy companies I follow in my Peak Energy Portfolio.

Right now, 14 of my 15 stocks are showing positive gains with 10 posting double-digit gains.

Click here to learn more about my Peak Energy Strategist newsletter and the name of this tank car manufacturer that could easily double in the next 12 – 18 months.

Good Investing,

by, Investment U Senior Analyst

http://www.investmentu.com

Copyright © 1999 - 2013 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History