Tag - Gwr

We're looking at another best-of-breed small-cap company today that we found by digging into top performing mutual funds.  This company is Genesee & Wyoming (NYSE: GWR), a short line and regional railroad operator.  If you like investing in high-potential small caps alongside some of history's best investors, as I do, then you're going to love this little company.  

Genesee & Wyoming is one of the few small-cap companies in the railroad industry, along with RailAmerica (NYSE: RA).  By small-cap standards, the $1.4 billion market cap company is even pushing it.  But this rail operator has a rich history dating back to 1899, and has laid tracks that will continue to deliver key commodities to markets in North America, Australia, and the Netherlands over the next century.  The company has also dipped a toe into emerging markets like Bolivia where it owns a minority interest in a railcar operator.

The company is held in Frank Susteric's small cap mutual fund, Turner Emerging Growth Investor (TMCGX).  After Susteric outperformed nearly all of his rivals for the nine years preceding 2008, the fund took a big dip when the recession struck, and the 10-year annualized return dropped to 9.13%. It's important to note that this return remains impressive however, outperforming the S&P 500 by 9.76% over the last decade.  Susteric has a strong history of picking stocks when they are gathering steam, and this company is likely to be no exception.  In the recent words of another famous investor, Warren Buffet, a play on the railroads is an "all in wager on the economic future of the United States."

Investors who believe in a strong economic future for the United States, like Buffet and Susteric, should want to own railroads because they represent a far more economical transport option for building materials such as steel, coal, and iron ore.  As the cost of oil, natural gas, and other transport fuels rise, the impact on trucking companies is four times greater than that on railroads – and you can forget about shipping coal in a cargo plane.