In the first article in this series , I described one of the ideas to come out of my Valuex Vail investing conference. In this piece I look at one of the presentations from the conference, which examines the impact of the shale oil revolution on one manufacturer of railcars, barges and storage tanks. This presentation, like the WWE presentation in the previous story, is a perfect example of what Valuex Vail is all about: the stimulation of thinking.
Kevin Smith, who runs Denver-based Crescat Capital, is a thematic value investor: He identifies big themes and then looks for stocks to execute his theses. Kevin made a case for Dallas, Texas–based Trinity Industries, a maker of railcars, barges and storage tanks. Kevin believes Trinity will benefit from the U.S. shale oil production boom, especially on the railroad side, as it is the largest maker of tanker oil cars. On the surface, Trinity is not expensive at 9 times forward earnings, and there is two-year visibility on the backlog of orders.During our Q&A (every presentation at the conference is followed by ten minutes of take-no-prisoners questions), it became apparent why the market is putting such a low earnings multiple on this stock. Pipelines are a real competitive threat and, because a tanker car has a 40-year life, with every sale of a tanker Trinity is creating competition for its future sales for the next 40 years.
Though Trinity is not my cup of tea, I’ve been fascinated by the dynamics of the U.S. oil market, which is going through one of its largest transformations in decades. In fact, watching this market is like watching the invisible hand of a maestro conduct a gigantic orchestra within the constraints imposed by various laws and regulations.
To learn how to apply to attend VALUEx Vail 2014, click here