As such, I'm eyeing shares of Wabtec Corp.
Weak freight car traffic does not inspire confidence
Freight transport companies, like Burlington Northern
Recent rail data, in my view, does not paint the picture of a vibrant economic recovery. Per AAR data for 2009, total carloads carried by U.S. railroads fell 16% compared to 2008 and are at the lowest levels since 1988. The most recent weekly data showed that weakness continued into January, with the biggest decline in coal carloads. Because the majority of coal cars tend to be made from aluminum, weak coal-car traffic helps explain why aluminum-related freight car demand remains weak at Alcoa.
Depressed traffic and low freight-car utilization to pressure manufacturers
With weak freight-car traffic, rail companies like Union Pacific and Burlington Northern have an idle railcar fleet that numbers in the tens of thousands. In other words, there is ample excess freight car capacity for when the economic rebound strengthens and rail traffic begins to grow. As such, in the near term, new freight-car capital spending by the rail companies is likely to be depressed until utilization levels for existing freight-car fleets improve. This spells trouble for freight-car manufacturers like Trinity Industries
Transit market offers a brighter opportunity, and Wabtec is a ticket to ride
What Trinity, Greenbrier, and others such as FreightCar America
Arguably, one of the best -- if not the best -- companies positioned to capitalize on that is Westinghouse Air and Brake Technologies
While some may voice a concern that Wabtec shares are approaching their 52-week high, I could see those shares trading higher as the transit market kicks into gear in 2010. And I'm not alone. The investing community at Motley Fool CAPS, including more than 100 All-Stars, has rated Wabtec four out of a potential five stars. Head over to CAPS to get your vote counted, and sound off below on the transit vs. freight debate.
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