(note: this post originally appeared on my Yahoo! Finance contributor page)
One of my favorite stocks went off the rails a few months ago. After chugging steadily higher and nearly doubling in the first nine months of 2014, railcar manufacturer Trinity Industries (ticker: TRN) went into the ditch—see what I did there?—as one piece of bad news after another hit the company.
T.S. Eliot said April is the cruelest month. He obviously didn’t live through last October as a Trinity shareholder.
Wednesday was a big day for my fund. Earnings season is upon us and two of our largest longs reported quarterly results. I expected both companies to smash analysts’ estimates. Sure enough, that’s exactly what happened. You’d think I’d be celebrating big gains in both stocks, but unfortunately, you’d only be half right.
Too bad this isn’t baseball. Batting .500 will get you into the Hall of Fame in that sport. In my game, though, it generally won’t get you too far.
A lot of investors have been struggling this week with a consistently bad tape, but Wednesday was particularly painful around my neck of the woods. First thing in the morning, CNBC’s Jim Cramer told millions of viewers that a story in the Wall Street Journal was “disastrous” for one of the largest holdings in my fund’s portfolio, Trinity Industries (TRN). The stock instantly melted down and dropped almost 9 percent on the day, erasing months of solid gains. It dropped another 4 percent yesterday.
I respect Jim Cramer a great deal for his knowledge, his energy, and his charitable works. And I pride myself on never “promoting my book” by getting into pointless he said-he said debates about stocks. (When I say, “promoting my book,” I don’t mean my forthcoming book Dead Companies Walking—available for pre-order now!–I mean my book, as in my fund’s portfolio.) I’m not a “buy, tell, sell” guy looking to make a buck by convincing other people to copy my trades so that I can sell into a temporary rally. I hold my average investment 12-24 months, and I want my performance to be a function of my intellectual ability, not my skill at promoting myself or my fund. But in this case, I am genuinely confused by Mr. Cramer’s claims about Trinity and other railcar manufacturers.
Far from being disastrous, recent news only bolsters my confidence in the company.
When I seek new investments for my $100 million fund, I often research companies that benefit from secular changes, large shifts in society and business. Three epic secular shifts happening right now are: the rapid adoption of cloud computing platforms, the tidal wave of growth in Texas (almost a million people a year are moving to that state), and America’s booming energy renaissance. The last change is particularly breathtaking. We’re pulling up almost nine million barrels of oil a day now in this country. That’s almost double the amount we extracted ten years ago. Natural gas production is way up as well, causing some analysts to predict America will be a net exporter of fossil fuels sometime in the next decade.
This growth in domestic oil and gas production is obviously good for energy companies. But how those fossil fuels get from the ground to the gas pump will strongly benefit one, very old-school mode of transportation: railroads. That’s why one of my favorite stocks these days is Trinity Industries’ (TRN). Its products were last considered “high tech” in the 19th century. But they’re going to make the company a ton of money here in the 21st.