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Industrial Stocks

The Small-Cap Wonder That Keeps on Trucking

By Elliott H. Gue, on Dec. 31, 2013

Over the past decade, railroad operators rank among the market’s top-performing industry groups in the S&P 500, having generated a total return of about 550 percent. In comparison, the S&P 500 delivered a total return of 110 percent over the same period.

Railroads have benefited from improved scheduling and other efforts to reduce costs, as well as an upsurge in the shipment of crude oil, chemicals and grains. This mode of transportation also entails significantly lower energy expenses than other freight services; a railroad can carry a ton of freight for 450 miles on a single gallon of diesel fuel, compared to between 100 and 150 miles for a long-haul truck.

The increasing popularity of railroads to move commodities and goods around the country also explains the lackluster showing by the S&P 500 Trucking Index, which has generated a total return of less than 60 percent over the past decade.

But the trucking industry appears to be poised for a turnaround, thanks to an uptick in freight volumes and efforts to cut costs without cutting corners.

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