Railroad Riches All The Livelong Day
Long Train Runnin’
Down around the corner, half a mile from here … see them tech gains run, and you watch them disappear.
Without love, where would you be now? Without love — erm, industrials, where would you be now?
That’s right, Great Ones: If you couldn’t hear my train a-comin’, we’re talking up railroads today.
Maybe you don’t spend your Sundays down by the telegraph office, sippin’ a cool sarsaparilla and waitin’ for hear-tell of the latest railroad news … so let me fill you in. There’s a shakeup stirring in this sleepy industrial sector, Great Ones.
While everyone else is talking about inflation gyrations, rates raisin’ and tech gainin’, all Great Stuff is saying is … I want to talk about trains. It’s Monday, and if we dive into interest rates and borrowing costs and tracking down fund flows (again) … I’m gonna get a migraine (again).
That’s why we’re hitching to the western sun, riding the great railroads to industrial stock riches. Kinda.
Well, the Canadian Pacific Railway (NYSE: CP) is on track to buy out Kansas City Southern (NYSE: KSU) for a whopping $25 billion in cash and stock. They got to keep on pushin’, mama, you know they’re running late.
Such a deal — if it passes — would be a major consolidation of North American railroads that even Cornelius Vanderbilt would be proud of. Combined, this network would form the first Canada-U.S.-Mexico railroad, which my countless hours of playing Railway Tycoon in the late ‘90s tell me is a pretty big deal.
Yes, you can take that midnight train to Georgia. You can take that midnight train going anywhere … if you ride the freight rails, at least.
Now, I say “if the deal passes” because the two train companies aren’t completely coupled together just yet. Both companies’ boards have approved the merger, but the U.S. Surface Transportation Board has yet to give its holy blessing.
And Canadian railroad companies don’t have the best track record (Get it? Track record? I kill me.) when it comes to buying U.S. railroad companies due to the obvious antitrust concerns.
But that didn’t stop Canadian Pacific CEO Keith Creel from going off the rails about this crazy train deal: “It’s pro-competition. It’s pro-service. It’s a pro for customers, employees in the North American economy!”
Sounds confident, yeah? Therein lies the crux of this whole coupling between Canadian Pacific and KCS: confidence.
More than anything else, more than their pandemic resilience and willingness to combine forces into a freight-hauling Voltron…
A deal between these two train-transporting titans shows confidence in the future of U.S. trade. It’s not just hope for an economic recovery … but confidence that industrial and manufacturing activity will roar back to life and, in fact, grow.
It also shows that value stocks like these industrials are back on the menu, boys and girls.
I mean, they have been for a while … especially if you’ve been paying attention to Great Stuff Picks. Before 2021 even started, we predicted that a flight back to value stocks — including railroads, manufacturers and the like — was on the horizon.
CP shares sank about 4% today on the news, while KSU choo-chooed its way up 15%. Though, I don’t recommend you try and hitch a ride on these rails if you’re looking for a way in on the industrial optimism.
You don’t have to get caught up in the shuffling madness of the locomotive breath to wet your whistle with industrial stocks. In other words … the boom of American manufacturing is much wider than any one railway play.
Maybe something closer to the heart of U.S. industry might be more your speed?
One North Carolina company holds the KEY to making this tech a global manufacturing power, unleashing what the Economic Forum predicts is a $100 trillion revival of American manufacturing.
Late last week, Royal Caribbean (NYSE: RCL) announced that it’s sailing away, setting an open course for the Virgin Sea. In other words … Royal Caribbean will resume a handful of vaccination-only voyages out of the Bahamas starting in June.
Before you don your Tommy Bahama garb and start humming Jimmy Buffett, the cruises will only be open to “adult guests fully vaccinated against COVID-19 and those under age 18 with negative test results.”
While this opens the way for other cruise lines to follow suit and dip their toes back into sailing … I’m gonna hold off on hitting this buffet, for the time being, thanks very much.
Tesla’s (Nasdaq: TSLA) ticking up again after it languished through last week’s tech exodus, freshly juiced by a new price target from Ark Invest’s famed Tesla bull, Cathie Wood.
Between Tesla’s push into self-driving cars and its insurance business, Wood and co. expect TSLA to reach $3,000 a share by 2025 — about a 334% leap from where TSLA trades today.
Besides the slight revival in TSLA today, there’s not much else to see here. Tesla bulls get more bullish. Water’s wet. So the world spins, ever onward.
The Great Vax race ain’t over yet — at least, not if AstraZeneca (Nasdaq: AZN) can help it. The biotech company just released bang-up stats for the vaccine candidate it developed with the University of Oxford.
AstraZeneca’s vaccine is reportedly 79% effective in preventing COVID-19 in a study of more than 30,000 volunteers. While the vaccine still fights an image problem in the EU after several unlinked blood clot complications, U.S. trial reviews found nothing concerning about the vaccine’s safety. AZN is up about 3% on the news.
We’re reaching the tail end of earnings season here in our latest Chart of the Week, courtesy of Earnings Whispers on Twitter. But you know I’m nevertheless trawling the earnings waters for a bite of interesting reporting action.
Here’s what stocks are on deck to report this week:
Oh yeah, that’s the stuff right there. Them’s the ending dregs of a long and brutal earnings season: a hodgepodge of retail, tech and biotech small fry, some much more recognizable than others…
Me? I’m looking at GameStop (NYSE: GME), obviously. What else is there to say? I doubt that we’ll see any of this dramatic e-commerce turnaround that Ryan Cohen and co. have hyped up, but we both know only a small subset of GME investors actually care about said turnaround.
Adobe’s (Nasdaq: ADBE) earnings are sure to be less meme-worthy than GME’s, but it’s a report to bookmark either way. The Photoshoppin’ pioneer’s subscription software model basically prints cash … unless you bungle it up somehow.
Adobe’s in a weird limbo of tech stocks that are necessary for remote work — trust me, you only get so far in graphic design with just MS Paint — but Adobe hasn’t been a hype-filled remote-life pick like Zoom.
ADBE’s been relatively flat since, what, September? Adobe needs a pep in its earnings step to really bring ABDE shares to life.
Then for all y’all Great Ones checking out the housing market, KB Home (NYSE: KBH) is your main stock to watch this week. With Lennar (NYSE: LEN) disappointing the Street last week with lower-than-expected home deliveries, KB knows where the homebuilding bar lies.
General Mills (NYSE: GIS) is still stuck in the ever-revolving door of consumer tastes. Packaged food purveyors have been hit or miss amid the pandemic — Campbell Soup’s recent tepid earnings come to mind here.
And whether or not General Mills continues to be a part of investors’ balanced breakfasts remains to be seen.
Hey! Ho! Let’s go, Winnebago (NYSE: WGO)! The highway star has blown me away throughout the pandemic. For how much we’ve talked up motor home stocks recently, I’ve yet to put WGO or its fellow road-roamer Thor Industries (NYSE: THO) into the Great Stuff portfolio.
Frankly, I’m not that in tune with the motor home market’s many moves, you see. (Gimme like … two decades, and I’ll be taking RV recs, cool?) And right now, I’m wondering how long WGO can keep its pandemic-fueled wheels a-rollin’ — if Thor’s reports of supply chain holdups are anything to go by.
Last but not least, an oddball in the spotlight: CuriosityStream (Nasdaq: CURI). It went public via a SPAC last year with little fanfare, but nary a streaming service slips by my eye.
CuriosityStream is an … interesting assortment of documentary content, we’ll say, if you like to veg and nerd out to nature docs and infrastructure videos. (Heady stuff, I know.) The service is already at 13 million subscribers as of January, so any and all growth predictions will be top of mind when CURI reports.
Have you checked out anything on CuriosityStream? Are you hitting the hot, dusty roads in your Winnebago? Are you an OG railroad tycoon with a yarn to spin?
Barring all that … what stocks are you watching this week as earnings season yawns to a close?
Let me know at GreatStuffToday@BanyanHill.com. Who knows? You might even see your rants and/or raves in this week’s edition of Reader Feedback! So, drop us a line right here, right meow.
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Until next time, stay Great!
Editor, Great Stuff