Shares of Textainer Group (TGH -2.94%), which owns a massive fleet of shipping containers, fell roughly 10% in April according to data from S&P Global Market Intelligence. That, however, is really a small change, given that the stock is up more than 220% over the past year. The thing is, these two facts are closely related.
Textainer's business is pretty simple. It buys shipping containers and then leases them out to companies that use them to transport goods around the world. When the pandemic first hit, the world ground to a virtual halt, but then it started to reopen, with huge consumer demand for the types of physical goods that get shipped in Textainer's boxes. Investors jumped on the bandwagon and pushed Textainer Group's stock up.
But there have been massive bottlenecks, and shipping costs have risen dramatically. That's left some of the shipping industry's customers more than a little unhappy. According to industry watchers, some companies are considering changes in the way they operate. One change they're considering is buying their own shipping containers so they can contain transportation costs, notably the excess fees they face when deliveries are delayed. In other words, while the situation is good for Textainer right now, it could actually be sowing the seeds of future headwinds.
Long-term investors need to take Textainer Group's stock advance with a grain of salt. Yes, the container leasing industry is benefiting right now, but that could actually make life more difficult if customers shift back toward owning their own boxes. Given the massive price advance over the past year, April's pullback is fairly modest. However, it could represent a shift in investor sentiment that needs to be carefully considered.