Sometimes good investment opportunities are right in front of your own eyes. When I was at a production site the other day and caught sight of the countless tank cars, I got to thinking about who actually does the better business on the rails. Who makes more money on a freight train - the locomotive or the railcars? So I was more concerned with this issue, since there is still no way to invest in Canadian Pacific after the merger. I already thought about this in the following article: https://getqu.in/tWYkun/
GATX - interesting alternative to traditional logistics companies on the stock exchange.
What makes $GATX (-0,64%)?
GATX is a US-based lessor/leasing provider of railcars in North America, Europe and India. This makes them one of the largest rail fleet owners in the world.
But what is the business behind it?
GATX leases the wagons directly to manufacturing companies. During the term of the contract, they are the physical property of the manufacturing companies, which have to bear the corresponding costs for maintenance and repair. Most people should be familiar with this from conventional car leasing.
They are therefore independent of the respective operating costs and operating resources that a transport company has to take into account and which, of course, cannot be neglected in view of rising energy prices, as well as independent of freight rates and order backlog.
Therefore a good alternative to the established transport companies, like $UNP (-0,01%) , $CSX (-0,16%) , $NSC (+0%) or $CNR (+0,55%) as investments.
In addition, they offer their service in maintenance. The license to maintain their wagons is transferred to external service providers and marketed. Customers are thus forced to visit contract workshops in order to be able to guarantee compliance with the leasing contracts.
The risks of the business:
However, GATX thus bears the worry of the freely available fleet and has to bear corresponding costs for each wagon that has not been leased. In addition, they are of course dependent on the freight rates of their customers in order to be able to achieve maximum capacity utilization when leasing.
Likewise, they bear the risk of the procurement costs for the construction of the respective product in the calculation.
The portfolio:
GATX has chemically resistant tank cars of various volumes and designs for liquids. This includes the respective regional standards. In addition, transport wagons for bulk goods, intermodal, general cargo and compressed gas containers.
Competition?
Hardly to be found on the stock exchange. The direct competitors are Ermewa and VTG.
Ermewa is now part of DWS. $DWS (+0,52%) . At the same time, VTG became the property of the Abu Dhabi sovereign wealth fund at the end of 2022. The Swiss competitor Wascosa is still present, but rather insignificant in these proportions.
The takeovers of major competitors actually show the lucrativeness of the business, so other investors are left out of the equation. The business model is a flourishing cash cow with excellent future prospects thanks to higher freight rates by rail.
All in all, for me a nice American second-tier stock with growth prospects. At the moment, however, I am waiting with an investment until the economy improves again for the industrial stocks on the active continents. As a bonus, there is always a nice little dividend.
