Sea-born transportation of basic materials is one major step in getting basic materials to market. In the transportation network, however, it is only part of the chain that gets product to market. There are quite a few other opportunities along the chain where profit may be had. If the chain is to be followed from where the sea-born example was left off, the next profit opportunity would be inter-modal “hand-off.”
Generally, what this means is that once the product is removed from the sea-born transport system, or put into it for that matter, it needs to get where it can be sold. This is inter-modal transportation and a system that involves quite a few opportunities for profit. If the port of Long Beach, CA were used as an example there are several forms of intermodal transportation that might illustrate where to look for opportunity in the delivery of basic materials. In the same fashion, one may also consider domestic rail and trucking services for grain and coal in the same way.
As a bulk product or shipping container is removed from a ship, it needs to be moved to a storage area. As product space is limited at a port it needs to be moved rapidly so schedules and product can be expedited. In this case (generally) regional trucking companies, port rail companies and forwarding expeditors are used to get the product on its way via national transporters. In this example, rail companies such as Burlington Northern/Santa Fe (NYSE: BNI) (the Warren Buffet move recently in the news) and CSX Corp. (NYSE: CSX) may be of interest. Although these companies may be a bit pricy, they do appear poised to do well long-term as the US economy improves. More to the small cap investor, getting the product to the departure point may be of interest. Among these opportunities are CNI Canadian National Railways and Vermont Intermodal (for more on intermodal, see www.loadmatch.com/what_is_intermodal.htm.)
One last area where there is opportunity in the transport of basic materials moves back toward getting the product to the intermodal aspect of the transportation chain. Looking at the conveyor belts, rollers and engines is a consideration. Wear and tear on these products is also a consideration. If the product breaks, it needs to be replaced. If the load increases, which it likely will in coming quarters, breakage will occur more frequently and profit increased for those companies providing the product.
Basic Materials are a sector that is fairly exposed to the cycles that an economy moves through. They rise and fall at the whim of these cycles. Basic materials, however, can always be a way to profit quite nicely if one sees the trends and understands that the profit from them will return and retreat. The trick is to invest when they, and their associated production elements, seem out of favor. Past the precious metals that are currently at highs, other elements have been beaten down and appear ripe for a return. Finding one or more of these element is the key and one that could move a portfolio if chosen well.
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