Some years ago we took a trip to Provence, the southern part of France. It is pretty far from our home and we weren’t keen to travel by car. As we planned to visit some of the important cities and a big part of the province, the only viable option at that time was to rent a car once we got there.
I love my wife and she is a hell of a researcher. She did an awesome vacation plan and selected some Car Rental companies, from where to rent a car once we arrived at our destination. After some negotiation with the car rentals we decided not to opt for this service after all, as a deposit, we didn’t have any coverage for (at that time), was needed.
So we opted for the next best thing, we took the train, from Nice to Marseille and then to Avignon and back to Nice. It was the best feeling ever, to spend time with my wife, admire the view and even watched a movie.
But both the train ride and car rentals have to be part of some companies listed on the market. Companies that perform well when tourism is booming. Maybe for the trains we will find one that is also backed by the local government.
Transportation stocks usually are in a cyclical state, fluctuating with the economy, increasing when the economy grows and decreasing when there are some problems (like now), and that’s why I think investing in airlines, car rentals and train rides, can help us now (or when the economy relaunches).
Before starting our search, don’t forget to check the other posts:
- Stocks Flavored Pie (I) – Setting up the direction
- Stocks Flavored Pie (II) – Airlines, the fastest way to travel
Canadian Pacific Railway
Searching for ETF for the transportation sector, I found that iShares S&P/TSX 60 Index ETF which has a positive yield for this year contains one of the most interesting railroad stocks: Canadian Pacific Railway
The CP engages in the provision of rail services, but not just passengers, it transports also commodifies, merchandise freight and intermodal traffic. The company has the HQ in Canada and was founded in 1881. One of the traits of the Canadian Paicific Railway is that it was one of the main actions of bringing Canada to unity and has a diversified business (land development, immigration and colonization, shipping, airlines, the hotel and tourist trade, china and crockery, trucking, waste management, even bottled spring water).
What I liked, in terms of prospect at CP is their Luxury Rides, perfect for spending the holiday (Experience the romance of luxury rail touring for the discerning traveler. Enjoy superior royal service on vintage carriages in Canada’s Rocky Mountains and beyond. ), and that’s why I think they can cut it in our PIE.
We are talking of a company that already suppressed her level before the crisis and it’s on an ascending trend since 2016 (actually since the beginning with small corrections).
It pays dividends, which also helps us a lot in taking this decision and has a profit margin of almost 30% (and that’s how much money they make in profit at a dollar – 30 cents). It has also the golden seal I was looking for, being included in one of the Vanguard Groups.
Guys, this stock looks awesome and I definitely want to add it. I won’t deny it’s pricy and I’m happy I can buy fractional parts of it.
Also it is raining with good news on them like: acquisition of a River rail Tunnel and a hydrogen powered locomotive project. As I told in last articles, prospects about the future are always a good sign of the development of a business
Adding the company to our stock, pushed our ANR from -0.58 to 3.40% (just having an equal distribution gives us 4% return).
When I searched for the Car Rental Company, I did not look for an ETF. No….. this was different. I used the mighty power of google to search for the best rated Car Rental Company in Europe. Sometimes, reviews are the best tool you have, as these services are for people, for travels.
The most appreciated company was Sixt SE, a Germany company that provides Rental & Leasing Services. SIX2 is included in multiple mutual funds (including Vanguard and iShares) so it passes this validation. They have a presence in 105 countries and was founded in 1912.
I am not very happy with their dividend return of 1.25% (in 2019) but I like their ability to recuperate what was lost during this pandemic and they are now at the same level as January. I could expect they will increase their profits once travel is again permitted and to pay higher dividends.
Looking at their chart, I expect their price to fall to around 75EUR, before on the rise again. Considering we are again taking the Cost Average, I am not scared to invest in it today and have the prospect of keeping the stock for more than 2 years. Looking at their sales growth for 2019 (of 12.87%) I think that we can extrapolate the same growth for the next few years.
Taking a peek in their news and press releases they have some good signs, but mostly they are affected by this period. To better face the situation they did some public bonds that were oversubscribed, demonstrating a high confidence in this company.
Overall, even if I have some mixed feelings, I am happy to include this stock in our portfolio.
Adding the SIX2 company to our portfolio brought us an even bigger return, and we are at 7.18%.
I didn’t finish writing this one and I am already picking the stocks for the next article. So stay tuned guys and hope you like the mini-series.
Thank you for reading and Happy Holidays!
Disclaimer: I am not a financial consultant, all the information you find here are my decisions, I taken at that moment, on my own analysis. I am open to any type of discussion about money. If you want to replicate my portfolio take into consideration that it is your money.