For long-term investors, buying shares in sectors like transportation, and specifically the big North American railways, has proven to be a great long term investing strategy. Due to the significant capital costs required to build and maintain railroads, competition is by definition limited.
This means railroads like Canadian National Railway (TSX:CNR)(NYSE:CNR) have significant market power. Being able to raise prices at or above inflation, and benefit from long term growth trends in consumption in North America, makes CNR one of my top picks for conservative long term investors.
The Canadian railroad giant recently announced shipments of grain from Western Canada have substantially increased, compared to its three-year average, a signal that the economy remains robust, at least in the transportation sector.
Grain is often looked to as a harbinger of what is to come, and steady shipment growth in this segment remains a great signal to investors that the party may not be over yet.
For defensive investors, buying shares in railroads, or other similar companies, in times of uncertainty is an excellent way to remain cautiously invested.
Shipments of grain and other necessary goods are relatively inelastic compared to other industries such as consumer goods or technology - sectors that can get hit hard when folks need to tighten their belts and reduce spending. Grain, chemicals, crude oil, and other staples are hard to cut, relatively speaking.
Invest wisely, my friends.
