Barron's had an article about the current state of the the toll road stocks, specifically Macquarie Infrastructure Group (MIG in Australia and I think MCQRF on the US pinks), Transurban (TCL in Australia and TRAUF on the US pinks) and Cintra (CIN in Spain and CCIDF on the US pinks).The chart below shows those three names traded on their home markets with another name in the group (in blue) that I'm going to refrain from mentioning for the time being.
The big problem with the three names in the article seems to be that when money was cheap and easily available they wildly overpaid for US toll roads--colossal multiples of EBIDTA that made the purchases tenuous when times were good and left no wiggle room for the type of slowdown in traffic you might see in the worst economic event since the great depression.
Basically the cash flow from tolls and anything else the toll road might own needs to pay for everything. If everything exceeds the revenue then there is a problem. If everything is not that big of a number then it will be easier for the operating company to ride out the downturn. Based on the Barron's article, Macquarie got hosed when it leased the toll road in Indiana (pictured above).
I still believe there is investment merit here if you can find companies that are relatively simple, and they do exist. If you do a diligent search you will find several of these types of companies that are not constantly levering up, moving things around and otherwise running complex businesses.
In the past I have explored all sorts of quirky investment themes including airports, farm land stocks, Norwegian fisheries and the toll roads. If you are one to invest in themes, and I am, then I would say part of the process has to be learning about more themes than you actually end up investing in. Or you may learn about something this year, maybe the fisheries, then keep an eye on them for a couple of years before buying one.
The toll road concept has merit but that does not mean that any of the companies were right before or are right now that depends on the person doing the research but the stock charted in blue is a toll road and it did the exact thing I had hoped for when I first started writing about this group. It certainly was not immune but did not implode as the others did.It is ok to learn and study a theme for several years before doing anything. To the extent you believe in holding a stock for the long term (more correctly hope to hold it long term) then why not be patient with learning something new and taking your time before getting in?
In case it wasn't obvious the picture above is no Indiana. A while back a friend forward several pictures of this mountain road in Bolivia.
21 comments:
Is the picture Indiana or isn't it??!
Roger,
I know you like to play investment niches. Have you given any thought (maybe you have) to playing the theme of providing assisted living housing and services to the impending wave of aging baby boomers (NHI, SNH, HR, HRP, VTR)? Your thoughts would be appreciated?
Hah, man you love that pic. Of course, it's a great pic!
The picture is NOT Indiana. They do not cover their payloads with tarps in Indiana.
The Indiana Toll Road is actually quite nice. I believe that's 80/94, where the trucks are navigating around a pothole.
Those using a 50/200 DMA crossover, 200DMA and/or other timing model need to be careful here of severe head fakes and unnecessary trading costs ahead.
It appears to me based on this fed manipulation and global stimulus that we will experience a strong impulsive move above the 200 EMA to the 1000-1020 zone which will be met with significant resistance. If one is inclined to short the market this would be the best zone of opportunity. My guess is that there will a 2-4 month period of price volatility between 1020 and 900 as the 50/200 EMA transitional process resolves itself with an eventual bullish 50/200 crossover. Bears will interpret the pullbacks from the resistance zone as the renewal of the bear market and bulls will be buying support in anticipation of an eventual breakout move. The fundamental news flow will likely be mixed as well, giving hope to both camps and enhancing the price volatility. If you are a trader, be prepared to range trade over the summer with an eventual break in either direction in the fall.
Great insight from Todd Harrison over at Minyanville...
http://www.minyanville.com/articles/dollar-Fed-dxy-economy-W-financials/index/a/22543
world class humor about the picture being Indiana!
the senior living would seem to be an obvious one, Barron's profiled several a while back. The one from that article got crushed, I don't recognize the symbols you left so i don't know how they did. the way in whcih the space in evolving away from the nursing home concept that people reasonably dread is very exciting but it may be a while before relying on people to plunk down $200k-$500k just to get in as being a good stock if any of those types of companies are even public.
the fake out comment. yes, covered here many times. I try to mitigate this by no going all at once.
Happy Mothers Day Roger,
I have a request: Business Development Companies. My guess is that most of us (your readers) are familiar with REITs (not that I'm an expert).
It's my understanding that the legislation that created them was part of the new deal, as was that which created REITs.
And my specific question about them is does mark to market hit them the same way it did/does banks.
Have you seen this new ETF
exposure to money market rates across 11 Emerging Market countries along with movements in the currencies of these countries relative to the U.S. Dollar. Constituent currencies include: The Mexican Peso, Brazilian Real, Chilean Peso, South African Rand, Polish Zloty, Israeli Shekel, Turkish New Lira, Chinese Yuan, South Korean Won, Taiwanese Dollar, and Indian Rupee.
http://finance.yahoo.com/news/WisdomTree-Launches-Money-etfguide-15154427.html?.v=1
http://finance.yahoo.com/q?s=CEW
That ETF has a cute twist to it at 2:55 EST on this Sunday. There are 800 shares offered for sale at 399.99, and the buy price listed is 20.58.
Thus, if some absolute fool calls up his broker and says buy me some at the market, he gets hurt and hurt bad. Nice scam, never saw that one before. Kind of reminds me of the day I got a ticket scalper in my cab and he said he'd flown in from Mexico City just to scalp tickets at a Big Ten football game.
i have a an article into TSCM about CEW that i think will run Mon or Tues.
taxi, the point you bring up is a market mechanics issue not a bona fide quote
Roger,
another golden nuggett.
Thanks for today and yesterday's post.
Jeff from Milan, Italy
Stay away from toll roads, criminal enterprises connected to congress and senators.
It is not investing, toll roads are big slush funds for politicians.
Roger- was hoping you could provide some feedback for me on bond diversification.
It is my understanding that If one holds TIPS, then the most diversifying bond fund against TIPS is probably US Treasury Intermediate Term Treasuries or ST. If there is deflation, the latter does well, if there is inflation, the former does well. Total Bond Market fund, because it has credit risk and repayment/ extension risk in mortgage backed securities, has a greater correlation with equities. This would also apply to those whom invest in GNMA.
If we enter a period where the Fed eases back on liquidity, but inflation doesn't rise right away (the Fed is 'ahead of the curve on inflation') then both TIPS and Bonds generally will both do badly. That might be the most likely future scenario ie the economy begins to recover, and the Fed, with its hugely expanded balance sheet of risky assets (to provide liquidity) starts to reverse engines. This is in reverse to the normal rule of thumb that either you have deflation (Treasury Bonds do well) or inflation (TIPS do well). thanks
The only "theme" you need to worry about is the destruction of the US dollar and capitalism which started with Reagan voodo economics.
De-regulation turned the fair playing field of the 30s-70s that oversaw the greatest century into a scum invested criminal enterprise run by congress and wall street.
Why do people feel a need to make political comments or comments ripping Roger for not providing specific recommendations, yada, yada, yada?
For the former, take it someplace else.
For the latter, just use the discussions here to make your brain work, not look for others to work your brain for you.
Thanks Roger, I enjoy your providing food for thought each day.
Yo, I got an uncle in New York that know the toll road boys. His godfather runs the tolls all the down to north florida.
If you want to invest he might be interested.
Rodger, did you watch Celebrity pprentice tonight?
Trump agreed that the stock market was more gambling then playing poker.
In other words you have a better chance of keeping you live saving at the poker table then giving it to a financial advisor that "bets" in on wall street.
Wall Street is so rigged in the favor of a few big players that it is more rigged then vegas.
The market is "rigged" to the point that most large money houses could care less what the market will look like in 5 years. The new mentality on wall street is daily movements, very short term. I don't think the big boys care about the future of America compared to their pockebooks.
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