Last week Obama rejected the Keystone XL Pipeline, which Republicans largely sought to approve alongside recent tax cuts. The decision was applauded by many environmental activists, and surprisingly, by the railroad industry.
The environmental issues are complicated. The oil pipeline would surely disrupt ecosystems, but many claim the alternative isn't much better.
"Canada is still going to produce its oil, and the U.S. is still going to need energy. Without the pipeline, Canada will have to try to sell some of its oil to China ... And we will buy more from the Middle East or somewhere else. The overall result: more oil shipped longer distances and greater chances of an oil spill."
Enter the railroad
The winner here becomes the railroad. Some of the oil that would have been moved by pipeline will now be hauled away by rail.
And since they were deregulated in the 1980s, railroad companies have had incentive to improve. The result is that railroads are considered one of the most productive and energy-efficient modes of transport.
"Onboard electronics assess topography, track curvature, train length and weight to calculate the optimum speed for conserving fuel," reports Time Business. "In fact, the Environmental Protection Agency calculates that moving freight by train rather than truck over long distances reduces greenhouse gas emissions by up to 75%."
Business section: Investing ideas
Do you believe the railroad industry stands to benefit from the rejection of the Keystone XL pipeline?
If you're interested in following the trends of railroads, we list the 10 biggest railroad stocks, sorted by market cap, here: (Click here to access free, interactive tools to analyze these ideas.)
1. Union Pacific
2. Norfolk Southern
4. Kansas City Southern
5. Westinghouse Air Brake Technologies: Provides technology-based equipment and services for the rail industry worldwide. Market cap of $3.30B.
6. Genesee & Wyoming: Operates short line and regional freight railroads, and provides railcar switching services in the United States, Canada, Australia, the Netherlands, and Belgium. Market cap of $2.63B.
7. Trinity Industries
8. RailAmerica: Engages in the ownership and operation of short line and regional freight railroads in North America. Market cap of $766.27M.
9. Greenbrier Companies: Engages in the design, manufacture, and marketing of railroad freight car equipment in North America and Europe. Market cap of $593.41M.
10. American Railcar Industries: Designs, manufactures, and markets hopper and tank railcars in North America. Market cap of $557.02M.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.
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