Short Line Investment

[Anonymous]

Do any of you invest in railroads smaller than Class 1s by buying stocks, bonds or other securities?

I'm not looking for investment advice of any kind. I'm just interested in how many railroaders, railfans or other interested people here make such investments. I'm thinking of either publicly or private issues.

For the record, I haven't yet purchased any such securities myself.

[Anonymous]

This is an interesting one. I am in Finance, and am considering investing. I naturally assume that my investment will be in a class one, but now that you mention it I am going to research some smaller roads. With the economy picking back up, I would not hesitate to put a little money into the Class 1 roads, they should go up over the next few years.

[Anonymous]

I used to own some stock in the Pioneer Railcorp. Bought it at 1.40 a share and sold it at about 1.50 a share. Nothing to dramtic but it was a money maker. Check that stock out.

[mudchicken]

An awful lot of the shortlines are privately held interests. Many times the ROI is small compared to the high rollers, but they tend to be steady performers. Even the big boys do not have guady ROI's and struggle to make more than a bank used to be able to on your $$$$. This type of thing with shortlines is a long term investment, they are trying to build equity on a shoestring budget. The Wall Street trash are not likely to be making noise over shortlines instead of the fast buck artists that they prefer. I have a small investment in two shortlines out of principle more than a desire to get suddenly rich. When the numbers get to looking too good, my suspicion is that track maintainance was sacrificed in the name of the bottom line (i.e. somebody is taking the money and running before the trains fall off the rail and land in the dirt. So much for the future of that outfit!)......Moral: The good outfits religiously take a designated portion of the profit and plow it back into the physical plant. The bad ones fail in a short period of time while trying to be a darling on Wall Street by propping up their returns...

Mudchicken

[Anonymous]

QUOTE: Originally posted by mudchicken

An awful lot of the shortlines are privately held interests. Many times the ROI is small compared to the high rollers, but they tend to be steady performers. Even the big boys do not have guady ROI's and struggle to make more than a bank used to be able to on your $$$$. This type of thing with shortlines is a long term investment, they are trying to build equity on a shoestring budget. The Wall Street trash are not likely to be making noise over shortlines instead of the fast buck artists that they prefer. I have a small investment in two shortlines out of principle more than a desire to get suddenly rich. When the numbers get to looking too good, my suspicion is that track maintainance was sacrificed in the name of the bottom line (i.e. somebody is taking the money and running before the trains fall off the rail and land in the dirt. So much for the future of that outfit!)......Moral: The good outfits religiously take a designated portion of the profit and plow it back into the physical plant. The bad ones fail in a short period of time while trying to be a darling on Wall Street by propping up their returns...

Mudchicken

MC-

Excellent review on all points. As someone who has been involved in smaller short lines at all levels and Class 1s as an operating guy (Engineer/Conductor) I have to agree. What I am thinking about are the publicly traded companies primarily.

The short lines/holding companies I am aware of that are publicly traded are:

Genesee & Wyoming Industries (NYSE: GWR)
RailAmerica (NYSE: RRA)
Pioneer Railcorp (Nasdaq OTC: PRRR)

Of the group I like G&W the best. In my opinion they are the best managed.

LC

[Anonymous]

I'm not up on the current situation, but the U.S. House of Representatives Subcommittee on Ground Transportation held hearings in 2000 relating, in part, to the large capital needs of regional and short lines. Seems the Class I movement to 286,000-lb. cars will put regional & short lines between a rock and a hard place, because the track they have is often from the days of substantially lighter cars dating back up to a century ago--track that just won't take the weights proposed--and the alternative of refusing newer cars would mean system breakdown between Class I and smaller roads. See:
http://www.house.gov/transportation/rail/hearing/07-25-00/turner.html And if anyone can update this information, please add to the discussion. But be forwarned that investing in other than Class I roads may entail future risks based on the need for capital to remain viable, much less profitable.

[mudchicken]

tuckahoe:

Nice idea. Poorly carried out. All it is is is a loan policy taken-up by a few (40% less than the fingers on both hands) with rediculous paperwork , unbelievable equity and collateral requirements and monkeywrenched by the truckers (who still get subsidized out the gazoo). And the @#^*$!!! trails people get grants too! (Tear it up instead of fix it up mentality)......

Mudchicken

ps-beef up those E-50 to E-65 Bridges first, then the track!

Mudchicken