I headed my article that way because it is not commonly known that true high-speed rail can do journeys city centre to city centre of up to 500 miles faster than planes. That is because there are no lengthy airport procedures and no long commutes required at each end to and from out of town airports. Additionally, those fast trains can serve several large towns along the way within that time.
For example, my wife and I travel from the centre of Zürich in Switzerland to the centre of Paris, France, by train faster than by plane and it is far more enjoyable.
The flight may be only 75 minutes, but it takes 45 minutes to get from central Paris to CDG airport and you should be there 2 hours before departure time. Then in Zurich allow 30 minutes to get luggage and travel into the centre. Total travel time 4.5 hours. Source: tripadvisor.com
By train: Zurich is only 4 hours and 4 minutes from Paris's Gare de Lyon thanks to TGV Lyria, which covers this distance at a speed of 320 km/h (200mph). From city centre to city centre, TGV Lyria provides the fastest and most comfortable transportation from Paris to Zurich and it serves two major cities in between as well. At some points that TGV train goes over 400kph (250mph). Those trains are built by Alstom (OTCPK:ALSMY). Why fly?!
In the US, the Rail Passenger Association has calculated that 27,000 city pairs - currently connected by plane and/or autos - are ideally suited for high-speed rail!
Flight shame, the growing hassle of aircraft travel, more high-speed rail and other train and tram links being built means trains are leaving the aviation sector grounded.
Most new work is taking place outside the US. It is getting left behind - as it is with 5G technology - yet in the 19th century, it built the world’s biggest rail network unleashing undreamt of productivity advances and, thus, a vast expansion of the economy into the world’s largest! Fortunately, there are now movements within the US suggesting that huge rail investments are coming and among the main beneficiaries will be Caterpillar (CAT), French company Alstom and Swiss company Stadler.
All will make excellent returns for investors...
We normally think bulldozers and excavators when we think of Caterpillar and not of trains but CAT has an important section of its business making locomotives and other supplies for the train sector through its Progress Rail company plus, of course, those other machines will be the favoured choice of many to prepare the foundations and lay the new rail track in many parts of the world. What worries me most about those CAT trains is they still appear to be little more than optimisation of old technology, the blight that has the aviation industry trapped in the past. Its most advanced passenger train only goes at 125mph (200kph) and they are still based mainly on diesel power. Hopefully, more is going on behind the scenes.
Preview YouTube video Progress Rail Unveils F125 Passenger Locomotive
CAT does not publish separate financial figures for Progress Rail so I do not know how it compares in sales revenue terms with the other companies. I will not write more on it because CAT is so well known. My two other rail favourites are less so...
Alstom or ALO on the Paris exchange, where I own it, is a world leader in locomotive manufacturing with a range that includes high-speed, intercity, regional and suburban trains, trams and metros. The first high-speed train to enter service in France was in 1981 and was built by Alstom. Today there is a high-speed network connecting most larger French cities and Alstom’s TGVs come across the border into Switzerland to whisk us off from Zürich to Paris.
It has AI technology already in use to ensure passenger distancing in today’s virus-threatened world.
Alstom is also in sound financial shape as shown in this investor presentation.
How many aviation industry companies can talk like this following the devastation caused in recent months by the virus?! "Over the first quarter of the 2020/21 fiscal year (from 1 April to 30 June 2020), Alstom booked €1.7 billion of orders, compared to €1.6 billion over the same period last year. At €41.2 billion on 30 June 2020, the current backlog provides a strong indication of future sales.” That was from Alstom’s 6 July press release.
Apart from that, sound finances and its broad product range, I especially like Alstom's coming acquisition of Bombardier Transportation, the Canadian train maker. Its products and services operate in over 60 countries.
In July, Alstom secured European Union antitrust approval for a deal worth up to 6.2 billion euros ($7.30 billion) aimed at making Alstom the world’s second-largest rail maker after China’s CRRC Corp. (601766.SS ).
The one thing that concerns me about that acquisition is knowing that the Bombardier (OTCQX:BDRAF) group - it also makes aircraft - has long been in financial difficulties and I hope none of those travel by train to Alstom, post-acquisition. In its last report Bombardier reported a quarterly loss of $319 million. It blamed that partly to virus lockdown and said the outlook for Transportation remains positive. It pointed to its $US 33.7bn order backlog and "strong industry fundamentals." The company added that with operation at its plants returning to normal, production is expected to accelerate in the second half, peaking in the fourth quarter and generally in line with 2019 levels. Its acquisition by a French company guarantees it will not face competition for orders in protectionist France and recently added to its order book there.
The need to compete with China might yet open the door at some later stage to the EU allowing Alstom to take over Siemens Mobility, a deal it once rejected.
This chart shows the relative sizes post-merger with Bombardier:
It shows the important role Alstom will play in the future of rail.
I will talk more of that future later but first a few words on my other passenger rail favourite; much smaller Stadler...
Stadler does not have a US listing. I own it, and recommend others buy it, on the Zürich exchange under the symbol SRAIL. That way investors also invest in the world’s strongest currency, the Swiss franc, and can enjoy the appreciation of that over time too plus the 3.25% dividend. Stadler has only been listed for less than two years but was established 75 years ago. It too has a full range of passenger rail transportation and sells worldwide. This is a recent order from Spain for electric locomotives.
Switzerland is not well known - except for watches, bankers and chocolates - but we have possibly the world’s best public transport system based on this rail network that connects every main town in the country. From each rail station trams, buses or ferries connect the remotest of villages. Zürich’s main station handles nearly 3,000 trains per day.
Stadler has made some of those trains and trams since its inception. This one is slightly more modern than those we see in the capital of Silicon Valley, San Francisco!
Stadler is bringing change to the US via a manufacturing plant near Salt Lake City where it will make the first hydrogen-powered trains in America.
Like most Swiss companies of its stature its finances are sound - details here - and that should make the dividend safe. As a relatively new listed company, it is not well-known so there has been little stock price appreciation but I am confident that will change as news of continued order flows such as this one in Germany get known by investors.
Stadler has some interesting model names to tempt passengers and investors: First you FLIRT, then you KISS, what follows is a SMILE.
Those names are not gimmicks - they have meanings behind them. SMILE means; “Schneller Mehrsystemfähiger Innovativer Leichter Expresszug” or in English; "Fast, multi-system capable, innovative light express train."
That is a bit of a mouthful in either language so I recommend happy flirting but do not do it for too long before investing in an Alstom, CAT and Stadler train kiss!
One of my predictions is that we will see a reversal of recent trends to re-urbanisation back to suburbanisation but with a difference - it will involve more innovation clusters/ecosystems. Those clusters will have universities and/or businesses at their core. We can already see this with the Research Triangle Park cluster and its links to universities in North Carolina. Wexford - part of Ventas (VTR) - is doing it in many places around the US.
I name more clusters in my article on Ashtead, the leading equipment rental company.
Switzerland has long had clusters around high valued-added watch makers - Tissot and Breitling in La Chaux de Fonds - and big pharma/biotech companies such as Novartis and Roche in Basel and digitisation is now moving people into the mountains and away from the big towns. All are connected by trains.
Many cities in Europe are banning autos/cars from entering. London is charging motorists £15/$19 to enter or drive through its centre.
More trains and trams will be needed to connect those cities and clusters in an environmentally-friendly way.
Also, as more passenger rail comes into service that itself attracts the building of new - or resurrection of old - residential communities. An example of this is in Scotland where the link between Tweedbank and Edinburgh that was closed in 1969 reopened in 2015 and now carries 1 million passengers per year, 40% more than first envisaged. That means more trains are needed.
Light rail in Minneapolis is spurring nearly $6.8 billion in development and this $1.6 billion extension there will bring more.
That and much more is happening right now directly related to...
The urgent need to stop polluting our planet will mean more reliance on trains. That together with future developments I mentioned above means money will be made if we climb aboard the right train. I include trams in this context as some new-age light trains and trams are becoming the same and are, or will be, interconnected as part of that cluster development.
Airport expansions are being cancelled but big and small things are happening worldwide with rail, including:
- Britain with its huge HS2 high-speed rail and the Great North projects underway.
- The U.S. Senate on March 26 passed H.R. 748, its version of a $2 trillion stimulus package to address the devastating economic and societal impacts of the COVID-19 pandemic. Called the “Coronavirus Aid, Relief and Economic Security (CARES) Act,” it includes many rail-related funding measures of direct benefit to the railway industry - all modes, freight and passenger.
- The first of the Prima T8 locomotive for India entered into commercial service at Pt. Deen Dayal Upadhyaya station in Uttar Pradesh. That is part of a EUR 3.5 billion contract with Alstom to supply 800 trains. The new 12000-horsepower locomotives will allow faster and safer freight transport, being capable of hauling 6000 tonnes at a top speed of 120 km/h. How fast do US freight trains go??!!
Alstom and Snam, an energy infrastructure company, signed a five-year agreement for hydrogen train development in Italy and is intended to be a pillar of the European Green New Deal.
- That EU Green Deal will prioritise trains generally with policy actions to be geared towards rail to ensure that low-emission transport options are supported over less environmentally-friendly modes.
- Alstom is supplying hydrogen-fuelled trains to Germany and my gases favourite, Linde (NYSE:LIN) , is building the world's first such refuelling facilities. I wrote about Linde in Linde/Praxair; A New Energy Major.
- In the US House Democrats recently rolled out a nearly $500 billion green transportation infrastructure bill aimed at updating America’s ageing transportation system.
- The Indian Government is inviting investors to participate in a $4 billion passenger rail PPP that will link 12 clusters and 109 origin-destination pairs/routes.
- France has perhaps the largest rail project in Europe underway to link inner Paris and its suburban sprawl. Since the French are rather protective that means yet more business for home company, Alstom.
- New night services have started from Vienna to Brussels. Others link Hamburg, Basel and Innsbruck and one is being considered from Malmo in Sweden to London.
Among other things they will drastically reduce man-made carbon dioxide emissions by planes. Those business travellers who want more than a video conference-type meet up can have a late evening meeting then hop into a berth on a train to arrive fresh for more meetings the next day in another city. That means no more early morning flights, long security queues and time-consuming baggage waits. It also means saving money on hotel stays.
- French, Dutch, and German lawmakers are mulling bans on short domestic flights better served by trains.
- Japan built the world’s first high-speed train and is now building the first mainline intercity train from Tokyo to Osaka using maglev technology. Its top speeds could be around 600kph/375mph.
Japanese Maglev bullet train prototype
- CHINA is on track to exceed its rail asset investment targets this year despite the impact of the coronavirus, after investing Yuan 325.8bn ($US 46.3bn) in the first half of 2020, up Yuan 3.8bn (1.2%) on the same period last year. This included opening 605km/375 miles of high-speed infrastructure. That is in addition to the huge amount it already has that is more than the rest of the world’s combined total.
So where is the US??? If pictures paint a thousand words, here is one of High-Speed Trains connecting cities in China.
And one of the US with this museum piece train in Menlo Park, CA, connecting cities in “high-speed” Silicon Valley...
- Fast forward to 2026. If you get time, watch this YouTube video about a high-speed train coming to Texas.
- The US Rail Passengers Association has this network in mind:
- The Gateway Program is another. This from Gateway's website:
The Gateway Program is the most urgent infrastructure program in America.
Gateway is a comprehensive rail investment program that would improve reliability, resiliency and redundancy while creating new capacity for a critical section of the Northeast Corridor (NEC) the most heavily-used passenger rail line in the country. That may be the first or one of the first high-speed rails in the US.
Those many things plus others - big and small, worldwide - paint a very big and positive picture for rail investors so now is...
For my last word, I shall make that a repeat of my earlier point - Happy flirting but do not do it for too long before investing in an Alstom, CAT and Stadler train kiss then sit back on board and smile!
This article was written by
Disclosure: I am/we are long CAT, ALSMY, SRAIL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.