A Guest’s View: The Railroad Industry

Contributed by Molly Caulfield

The freight train industry is an interesting showcase of how modern ingenuity is sometimes inferior to good old fashioned know-how.  Though it may not seem to be a prevalent source of transportation, the freight train service is used to move almost half of goods in the United States.  For this reason, it is extremely vital to our economy as they keep most businesses moving.  Because freight railroads are less expensive than other forms of transporting goods, they also keep American products more competitive, as they keep costs of sales down for different companies.  So what exactly does this mean for the average investor?

In my opinion all of this makes the freight railroads susceptible to being undervalued, because the market is deeming it obsolete.  I would surmise that the average investor is not entirely aware of just how important freight trains are to the investment’s operations.  We see freight planes at airports and semi trucks on the highway, so we assume that must be the most common way to move goods.  Living in Chicago, and seeing many railways that are closed down, it is only a natural assumption that if those tracks aren’t being used than companies must be using another method of transportation.  But just because we do not see them working, does not mean that they do not still account for a large portion of goods transport in the United States.  It is for this reason that I would agree that railways would be a good place to invest as they are necessary to the functioning of our many businesses, and they are grossly underestimated by our average American.

I also think that it is extremely important in a world well aware of global warming that the United States government not make an example out of railroads.  We have seen the extensive regulation, deregulation, and re-regulation of railroads in the United States and I fear that a continued approach of price ceilings and government control will be crippling to this industry in the future.  The government loves to intervene on the free market, and in this case more than ever, they would be causing more harm than good. 

In any case, freight trains have proven the test of time to being cost effective and efficient.  Therefore, do not underestimate how your eggs may have gotten to your grocer.  If you are still skeptical about whether or not the freight industry might offer any positives from investment, look at your annual reports—which in most cases you should be getting any day now—and see how the investments you already have choose to transport their goods.  Then maybe you won’t be so skeptical of something that seems a little outdated but still gets the job done better than almost anything else in the world.

Ms. Caulfield is a finance honors student at DePaul University. 

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