Stock prices of soundly fundamental, well-managed, large-cap companies should reflect the growth in the economy, which will slowly improve over the next 18 to 24 months, and the low operating margins corporations established at the start of the recession are expected to improve and lead to better earnings, says Howard A. Trauger, President of Schuylkill Capital Management.
“We like the pace of the growth of this economy because with our 18-to-24-month investment horizon, we can take our positions in quality stocks when they are trading at today’s lower p/e levels,” he said. “We’ve identified industry segments and specific stocks that will likely benefit as the economy improves and as the fright factor diminishes.”
Trauger likes Union Pacific Corporation (UNP), the largest public railroad in the North America that operates on 32,000 miles of track. He says Union Pacific owns nearly a quarter of the Mexican railroad, and 2011 revenues of close to $20 billion were generated by the transport of coal, industrial and agricultural products, chemicals and automotive parts.
“Ten to 15 years ago, when the country was faced with record wheat and crop harvests, the railroads couldn’t find their boxcars, not so today. Clearly, this is big freight at its level best, and as the economy improves, more freight will move on a much more efficient platform than in years past,” Trauger said.
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