Warehousing: China winning on another front

I'd look at these three:

• Orient Overseas International (OROVF, news, msgs), a Hong Kong company with three main businesses: container transport and logistics, ports and terminals and property development. Almost all of the revenue of the company's container subsidiary, Orient Overseas Container Line, comes from Asia and trans-Pacific routes. If you think the United States is headed for an economic slowdown, the stock is certainly pricey right now. But I like the company's cash position: Orient Overseas sold its North American container terminals in 2006 and has said it is considering options to reinvest the proceeds in Chinese ports and in increasing its container fleet. The company has also spent some of that cash on a special dividend and has put an additional special dividend on its list of possible uses for the cash.
• Kerry Properties (KRYPF, news, msgs), also a Hong Kong company, like Orient Overseas mixes its logistics business with a big dose of real estate in Hong Kong and the rest of China. But unlike Orient Overseas, shares of Kerry don't give investors exposure to ocean shipping or the ups and downs of transoceanic freight rates. Instead, these shares are strongly tied to physical assets such as the warehouses that the company owns and manages in Hong Kong and its portfolio of infrastructure projects that includes tunnel crossings in Hong Kong and a water-treatment project in China's Inner Mongolia Autonomous Region. (So the stock fits into the framework of my "Infrastructure: The new gold" column of March 20.) Kerry Properties, despite its strong Hong Kong roots, may actually be the most globally focused of these three companies. The company has offices in Germany, France, Poland, the Czech Republic and Hungary.
• Nippon Yusen Kabushiki Kaisha (NPNYY, news, msgs) is even more diversified, with interests in passenger ships, petrochemicals, information processing and travel. But the core that attracts me to this Japanese company is the combination of the company's NYK Logistics business and its ownership of Japan's largest shipping line. Nippon Yusen should be in a position to earn a good profit from those assets as China and Japan continue to evolve something resembling a unified economic structure that allocates such functions as design and manufacturing across the two countries. For the nine months that ended Dec. 31, 2006, revenue climbed 13%.

Wait, there's more

Remember, this is only half the picture. You can also make money from the response to China. And the response from the developed world to the Chinese challenge -- in this area at least -- has been surprisingly robust, especially in the United States.

New container terminals are under construction or planned for Houston; Mobile, Ala.; Jacksonville, Fla.; Charleston, S.C.; Wilmington, N.C.; and Norfolk, Va. Voters in Panama have approved a long-delayed expansion of the Panama Canal, scheduled for completion in 2014. Just south and north of the U.S. border, new ports are under construction or being planned for Lázaro Cárdenas, Mexico, and Prince Rupert, British Columbia.

How do you profit from all that activity? I think by looking at the next stage of the bottleneck. All that container traffic has to get from these ports to stores and warehouses around the United States. That means railroads and trucks. Especially railroads.

The neatest thing about railroads, in my opinion, is that they aren't making any more of them. With the economy softening, I'm not sure I'd snap up any of the big railroads now, but Burlington Northern Santa Fe (BNI, news, msgs) and Canadian Pacific Railway (CP, news, msgs) would be my choices on any weakness.

Warren Buffett's Berkshire Hathaway (BRK.A, news, msgs) had bought about 11% of Burlington Northern as of last week. Buffett has been purchasing shares of two other, unidentified railroad stocks, too.

Don't think that trucks and roads are too mundane to invest in, though. There's big profit to be made these days in roads and improving the trucks that haul stuff on them. The Chinese and other developing countries are determined to build out their infrastructure in this area. And the United States knows that it's always just a traffic jam away from a commerce-crippling bottleneck. In my next column, scheduled for April 17, I'll look at ways to make money as the world keeps on trucking.

Join Jubak at The Money Show

MSN Money's Jim Jubak will be among more than 100 renowned money experts, advisers and analysts sharing their wisdom at more than 250 free workshops at The Money Show Las Vegas, May 14-17 at the Mandalay Bay Resort & Casino. You can also network with fellow market enthusiasts, exchange investment ideas, share your experiences and enjoy the fellowship of like-minded investors. Admission is free for MSN Money readers. For complete details or to register for free admission, call 1-800-970-4355 (be sure to mention priority code #008095) or visit the Money Show Web site.

Editor's note: Normally, a new Jubak's Journal is posted every Tuesday and Friday, but Jim will be on vacation the rest of this week. His next column will appear April 17. Please note that recommendations in Jubak's Picks are for a 12- to 18-month time horizon. For suggestions to help navigate the treacherous interest rate environment, see Jim Jubak's portfolio of Dividend stocks for income investors. For picks with a truly long-term perspective, see Jubak's 50 best stocks in the world or Future Fantastic 50 Portfolio. E-mail Jim Jubak at jjmail@microsoft.com.

At the time of publication, Jim Jubak did not own or control shares of any of the equities mentioned in this column. He did not own short positions in any stock mentioned in this column.

< previous |  1 | 2 |