If you have read any of my past articles, you know that I am essentially a theme investor. The industrialization of emerging markets is one of my current themes. I track two portfolios BRIC and Big Build Out (BBO) based on this theme.
BRIC is simply an equal weighted basket of Exchange Traded Funds (ETFs) representing Brazil, Russia, India and China. BBO is a basket of world-wide producers of raw materials like iron ore, copper and nickel necessary for industrialization. The basket contains proven industry mining leaders such as: diversified producers – BHP Billiton (BHP), Rio Tinto (RTP), Teck Cominco (TCK); aluminum producer Alcan (AL); copper producers – Freeport-McMoran (FCX), Southern Copper (PCU), Phelps Dodge (PD), Lundin Mining (LMC) ; iron ore and nickel producer – Companhia Vale Do Rio Doce (RIO). The portfolio also includes suppliers to these companies such as heavy equipment manufacturers Caterpillar (CAT), Terex Corp (TEX) and Bucyrus International (BUCY).
I have been considering adding a couple of transportation stocks into the mix. Supplies have to get there some kind of way. Initially I was thinking of shipping or air freight companies. However, after reading headlines such as “China will invest 1.5 trillion (US$190 billion) to increase the nation’s rail network to over 90,000 kilometres by 2010″ from the China Daily 11/23/06. Or quotes such as the following from the China Railway Development Report:
Because of system limitation, China’s railway industry still lags behind in investing-financing areas. This results in railway construction unable to meet the demand of economy development. There is high demand in our railway transportation industry, and sometimes the demand exceeds supply. It is estimated that the supply capacity will increase a lot in future and relieve transportation pressure effectively.
This has me thinking railways. Apparently, road and railway contractor China Railways Construction Corp has announced plans for an initial public offering (IPO) in early 2008. Others will surely follow. Instead of investing directly in a Chinese company, I am more interested in world-wide companies listed on the US Stock Exchanges that are positioned to assist or joint venture with companies like China Railways.
Now the search begins to find such companies.