The post Best Railroad Stocks by Chris Davis appeared first on Benzinga. Visit Benzinga to get more great content like this.
Railroad stocks are some of the most established securities in our investment market. Railroads were the major form of commercial transport during the Industrial Revolution and they remain essential to the world’s consumer economy today even in a world of drone delivery and space flight. If you’re looking for railroad stock under $10, this may not be the industry for you.
Railroad stocks have traditionally been a haven for cash-flow investors and are well known for their steady dividends. This may have been the reason Warren Buffett continued to hold Berkshire Hathaway’s position in BNSF Railway Co. even as he wholly dumped other transportation industry stocks during the coronavirus pandemic. However, many investors are taking advantage of macroeconomic shocks and new technologies to pull capital gains out of railroad investments.
Remember, railroad operators are still essential to the supply chain and the economy on the whole. Every investor has seen a train pass by during their daily commute, and those trains often bring the products you need to your city. However, railroads have issues with revenue generation because the network isn’t growing and the locomotives are getting older. How can investors split the difference and avoid losses?
Quick Look at the Best Railroad Stock:
- Norfolk Southern
- Canadian National Railway Company
- Warner
- Union Pacific
- Trinity Industries Inc.
Contents
Overview: Railroad Stocks
Railroad stocks were the dominant trading security during the 1800s. Mohawk & Hudson, the first railroad stock, was traded on the NYS&EB, a precursor to the New York Stock Exchange (NYSE). Speculation on railroad stocks caused the failure of Jay Cooke & Company, a prominent Philadelphia finance firm in 1873. The NYSE shut down for 10 days in the aftermath. Over the next few decades, railroad stocks would be an essential component in funding railroads and creating the fortunes of the Vanderbilts, the Goulds and the Huntingtons.
Consumer service has always held the bottomline steady in railroading, but technology has always driven its growth. The railroad companies providing investors with great returns today are incorporating precision scheduled railroading (PSR). PSR allows more efficient asset utilization, which improves the operating ratio and overall profitability. Higher efficiency also shields the company from the losses in revenue that usually correspond with economic downturns. This leads to better earnings per share and higher investor returns.
Remember, however, that railroad stocks can be quite volatile. Yes, Warren Buffett made quite a lot of money in this sector, but the industry could go south at any time. Plus, if progressive policies calling for high-speed rail prevail, it’s more likely that the industry will surge that much more. If not, it’s possible that companies like UPS and FedEx could enhance their air fleets and push for air cargo to make a dent in the railroad sector.
Best Online Brokers for Railroad Stocks
Because railroad companies were established as a cornerstone of the stock market, they are all usually available on the majority of online brokers. Even if you are in the U.S., you can easily invest in railroads based in Canada or Hong Kong. Railroads were essential in building the international connection among securities markets in different countries. That relationship is far too established to easily break.
Because you can find your chosen railroad stocks on virtually any broker, you have more leverage to choose that broker based on its individual idiosyncrasies. No matter how good your chosen stock may be, you still need great execution to make profits in the stock market. You get great execution from the tools your broker provides.
Take a look at this online broker comparison table and choose based on the features that complement your trading style.
Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 150 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.
IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.
- Access to international markets
- Active traders
- Detailed mobile app that makes trading simple
- Wide range of available account types and tradeable assets
- IB SmartRouting provides significant price improvement vs. industry
- Fractional trading allows investing regardless of share price
- Industry’s lowest margin rates
- Earn more by lending your fuly-paid shares
- Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources
80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Plus500 is an online CFD broker focusing on contracts for difference (CFDs). CFDs are similar to binary options in the U.S. where traders take all-or-nothing speculation on the prices of certain securities like indices, commodities or currencies. While not legal to trade in the U.S., CFDs are legal in many jurisdictions across the globe and Plus500 offers a wide array of tradable markets using these instruments.
Plus500 doesn’t charge commission and only profits off the spread, which is the difference between the buy and sell price of a specific security. But Plus500 is not a broker for beginners — the education materials are sparse and CFDs are risky derivatives capable of sapping out all of an investor’s capital. Only trade these instruments if you understand how they operate and the risks involved with buying them.
The Plus500 CFD platform is for CFDs. The Plus500 Futures platform offers futures for U.S. customers, and Plus500 Invest offers stock trading.
- Traders looking for a smooth mobile experience
- Great mobile app
- Low spreads and commissions
- Unlimited demo account
- Only derivatives are available
- Not open to U.S. residents
Public is the only investing platform that lets you trade stocks, ETFs, crypto, bonds, options and alternative assets—like fine art and collectibles—all in one place. Public also provides access to custom company metrics, live shows about the markets, and insights from a community of millions of investors, creators, and analysts.
Today, Public provides more ways to create a diversified portfolio than nearly any other online broker. Members can engage in sophisticated investing strategies and access a wealth of investing insights—from company-specific analysis to live audio shows and town hall-style Q&As. In addition, Public offers a premium membership tier with unique company KPIs, detailed performance metrics, and institutional-grade research.
- Stock and ETF investors
- Crypto investors
- Investors looking to diversify with alternative assets or bonds and options
- Commission-free stock and ETF trading
- Fractional share investing
- Advanced data, tools, and insights with Public Premium
- You can’t transfer crypto to another wallet
- No mutual funds or precious metals
- At this time, only offers individual brokerage accounts and not IRAs
Robinhood is a popular trading platform known for its commission-free trades and user-friendly mobile app. Ideal for novice investors, Robinhood makes it easy to buy and sell stocks, ETFs and cryptocurrencies. The platform offers a straightforward, no-frills experience, making it accessible for users new to investing. With features like fractional shares and a sleek interface, Robinhood lowers the barriers to entry for investing, allowing users to start with just a few dollars. It lacks the advanced tools and research options that more experienced investors might seek. Overall, Robinhood is a great choice for beginners seeking a simple way to invest.
- Beginners looking for simplicity
- Mobile-first investors
- Commission-free trades
- User-friendly mobile app
- Instant double
- Cash management
- Access to cryptocurrencies
- Limited research tools
- No mutual funds available
- Basic customer support options
TradeZero is an online broker and free stock trading platform that provides everything you need to successfully share and trade, including round-the-clock customer support. TradeZero provides four different trading state-of-the-art software programs with its services, a locator for sourcing shares for shorting, commission-free trades, and real-time streaming, to name a few of the features promoted on their website. The software is a unique and (potentially) affordable option for anyone interested in stock trading.
- Traders seeking high transparency and mobility in a stock trading program
- Those attracted to commission-free trades
- Those seeking a free version of a high-quality trading program
- 24/7 live customer support
- Uses ZeroWeb technology, a powerful level 2 online platform with direct market access
- Mobile app allows users to access stocks and trade in real-time while on the go
- Enforces Pattern Day Trading restrictions (accounts need to maintain a daily equity balance of at least $25k)
- Mobile app could offer more features
Features to Look for in Railroad Stock
Here are some important features to look for in railroad stocks.
- Rail line mileage: The more rail line mileage a company has in its control, the more access it has to deliver goods. More mileage also means less congestion on its tracks, so goods move faster.
- Dividend history: Railroad companies are known for steady dividends. Whether you want a growth stock or not, you should always look for a company to hold or increase its dividends over time in this industry.
- Implementing technology: The railroad industry is consistently updating its technology. To stay competitive, companies must keep abreast of more efficient ways to transport goods and conduct operations.
- Economic health: Stocks tend to grow with the economy, and with railroads serving as the backbone of the logistics industry, poor economic performance could lead to poor stock performance in this sector.
I’ve Been Working on My Profits
Unless you bought during the lowest point in the March lows, you won’t find any railroad stocks under $5. You can still find great deals with leverage for capital gains and dividends. We may see new highs for the entire industry as the U.S. goes back to work after social distancing. If not, investors have a steady dividend to fall back on.
Frequently Asked Questions
Are railroad stocks worth it?
Railroad stocks can be worth the investment, but you must do your research and understand how the overall market is performing.
Are railroad stocks expensive?
Stocks across a large industry will vary widely in price. Railroad stocks could be considered cheap or expensive depending on their situation and how the market is moving.
What are the best railroad stocks?
Check out Benzinga’s list of recommended railroad stocks on the list above.
The post Best Railroad Stocks by Chris Davis appeared first on Benzinga. Visit Benzinga to get more great content like this.
