Stocks may be expensive now, but they won’t be forever. Five Peak Oil plays to buy when they’re cheap again: Two busses, two rails, and an ETF.
Tom Konrad, Ph.D., CFA
Two weeks ago, I told you why I feel that the market is more likely to head down than up from here (it’s been flat since then.) I’ve been selling covered calls on my holdings, several of which have been called away. I plan to sit on the cash until the market has fallen at least 10%, after which I may start selling cash covered puts, but I won’t start buying in earnest until the level of fear in the markets is much higher than it is today.
To occupy myself during the wait, I’m putting together my shopping list of stocks I plan to buy when next they are cheap. This first installment is a set of clean transport stocks, which are combination plays on Peak Oil and Climate Change. You will be able to find future articles in this series here.
#1 New Flyer Industries (NFYIF.PK, NFI-UN.TO)
New Flyer is a long-time favorite, and I probably won’t be buying more even if it falls: I doubled my holdings in this company in the beak days of December 2008, at US$5.09-$5.29. This is one stock I have not been selling in the recent run-up, despite the fact that it has doubled since then. So I probably won’t be buying more even if it falls just to keep my portfolio relatively diverse.
#2 Portec Rail Products (PRPX)
I brought Protec to your attention on February 26, when the price was trading around $5, for what I felt was no good reason. Although I already owned some, I put in an order that day to buy more at $4.85, but the stock has never been back there since, and now trades around $10. If it falls back to $6, I may not be so greedy this time. Until then, I’m still holding my initial position.
I first ran across FirstGroup in late 2007 when looking for bus stocks for my investing in mode-shifting theme. As I mentioned in early 2008, the stock seemed overvalued to me at the time, and I focused my attention instead on New Flyer. Like Portec, I now wish I’d snapped up a bunch of it near the March lows, but it had dropped off my radar until The Economist brought it back to my attention with a fascinating profile of the CEO, Sir Moir Lockheed, in early April. By that point, the stock had rebounded sharply, and I’m left waiting for the next buying opportunity.
Also known as Westinghouse Air Brake Technologies Corp, Wabtec was also profiled in my article on rail transit stocks in 2007 (as was Portec.) Like FirstGroup, it fell off my radar because I didn’t like the valuation at the time. Today, the price is about the same as it was back then, but income has increased, especially in the first quarter of 2009, and we now have much more political support for rail transit spending. As a profitable company with a strong balance sheet, this is one to scoop up when opportunity presents.
#5 Powershares Global Progressive Transport ETF (PTRP)
Okay, this one’s not really on my shopping list, but I many readers might consider it. I like picking stocks, and generally believe that the diversification benefits of specialty ETFs don’t usually justify the expense ratios (PTRP’s is 0.75%). The exception is when the ETF gives access to foreign stocks which the investor might find hard to buy individually. PTRP does have significant investments in several foreign companies, so it might be worth considering. Some names in the portfolio the North American investor might find hard to buy are China’s BYD group, bike makers Giant and Shimano, and Charles’ high speed rail picks, Bombardier (BDRBF.PK), Alstom (AOMFF.PK), not to mention FirstGroup, above.
DISCLOSURE: Tom Konrad and/or his clients own NFYIF and PRPX.
DISCLAIMER: The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.
