Sights From The Railway

I rode the Rocky Mountaineer last week and learned a lot more about the railway business being up close and rolling on the CP and CN rail lines. It was a very informative trip for me. As we sat in the rail yard near Vancouver, we looked up at the Port Mann bridge. One thing that becomes very clear is that most of the world’s commodities are moving all around us, yet we are unaware of the volume and scale of the movements.

In the picture above, rail cars loaded with liquids await. In Canada, these trains are typically filled with oil, taking the volumes to west coast terminals. Lots of elements are also transported, like chemicals for manufacturing, as an example. Rail cars are specifically designed to carry these cargoes.

A company like Linde (LIN) is a big user of the railway network, striving to move chemical products safely around the world. The stock has been a nice performer, climbing from the bottom left to the top right. The purple area shows it trading in line with the $SPX. The SCTR ranking shows that the stock has been weaker in 2021 than it had been for 2019 and 2020.

Air Products (APD), a competitor to Linde, also moves inputs and final products through the world at scale on the railway. This chart looks less bullish as the chart double-topped months ago and is now down near the 52-week lows. The purple area highlights that the stock has been underperforming the $SPX for the last year after outperforming the two previous years.

Chemours (CC), the mid-size specialty chemical company, moves their input goods through the rails as well. These industrial players are very important in the global economy, filling niches that the general public don’t think about. What we see in the stock price of this company is that the uptrend is over and the stock is trying to hold the 40-week moving average this week. While there is no reason to believe it is going to get worse, it is interesting to compare the SCTR rankings from these three industrial Chemical companies. Chemours has a very strong SCTR ranking just looking at the line. However, CC is a mid-cap company being compared to the mid-cap stocks. The other two are large-caps being compared to large peers in Technology, Finance etc. That information is shown on the data header.

It is impressive to see CC outperform the peer group and the $SPX for a long period of time. When I look at the relative strength compared to the $SPX, it has been underperforming for the last few months. The real question is when will it get its mojo back?

When we look at the railway chart, $DJUSRR, we can also see that the railways are underperforming as well. Without getting into the weeds of the financial statements, investors are telling us what we are starting to see in the data. The economy is starting to slow a little from the dramatic rally of 2020 and early 2021.

Charts can help guide us on the stages of the economic cycle that the world is in. I’ll be able to show that with more articles covering off the industries involved with the railways in future articles. Stay tuned!

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New members will also have access to the last monthly conference call and weekly video laying out the basis for the coming energy crisis. While Greenpeace continues to rail against fossil fuels, we are about to see what happens as energy supplies plummet and people freeze in the dark. It’s a battle royale and I’ll be covering off ways to trade it over the coming months.

Good trading,
Greg Schnell, CMT, MFTA