We often hear about self-driving cars, space travel for the wealthy and other new transportation technologies that seem due to arrive shortly, but one age-old mode is still holding its own: Water.
"Moving goods on the water is the most efficient transportation mode," says the American Waterways Operators, an industry trade group. Oil is the single-largest commodity riding America's waterways, while companies move 20% of U.S. coal on the water as well.
Two options that I like for playing in the water-transportation world are:
- Navigator Holdings (NVGS). This company owns and operates what it claims is the world's largest fleet of "handysize" liquefied-gas carriers, which move liquefied petroleum gas, petrochemical gases and ammonia for energy companies, industrial users and commodity traders. ("Handysize" is a naval term that refers to smaller bulk carriers.)
- Kirby Corp. (KEX). Kirby owns America's largest fleet of inland and offshore tank barges, moving bulk liquid products along the Gulf Intracoastal Waterway the Mississippi River system and all three U.S. coasts (Atlantic, Pacific, Gulf of Mexico). It also has a division that services the diesel engines used in oilfield equipment, power generation and other applications.
Both stocks have tanked by around 50% over the past year as the commodities industry they serve suffered, but that makes them good values -- and I think they'll eventually ride the waves to ever-increasing heights.
Using P/E/G to Pick Water Plays
Those of you familiar with my work know that I choose stocks using computer simulations of strategies championed by some of history's most-successful investors.
In this case, I picked water-transportation stocks by using the thinking of legendary Fidelity Investments fund manager Peter Lynch.
The key metric that my Lynch-based strategy uses is the P/E/G ratio, which measures price to earnings relative to growth. This indicator shows how much the investor is paying for growth given a stock's current price.
A P/E/G ratio of up to 1.0 is acceptable in my simulation, while a P/E/G below 0.5 is especially strong -- and that's where Navigator Holdings especially shines. Its P/E/G is currently at 0.20.
Kirby's P/E/G is considerably higher at 0.79, but that's still quite a desirable level. Both companies also have acceptable debt levels.
The Bottom Line
Water-transportation stocks aren't as sexy Tesla (TSLA) or Apple (AAPL), but they're a key part of our country's bedrock industrial infrastructure. And believe it or not, that can be a very good place for investors to be.