If you live near train tracks, you will see trains go by on a regular basis and if you examine closely the names of the companies will tend to be small. In another time, railroads opened up the country and everyone travelled by rail. After the automobile was invented, mainly freight travels by rail and commuters travel by train. The passenger service of Amtrack is heavily dependent on commuters, for the other choice of longer distances is the plane. In terms of freight trains, there are only a handful of companies including Warrren Buffett’s BNSF or Burlington Northern Santa Fe in which the dividends he has received paid his financing costs to purchase the stock. When the industry has a few large players and suppliers, the industry is consider mature and everyone collects dividends and lets life go on. Into this picture is a near supplier of trains which you might see if you are a commuter. The CRRC which stands for Chinese State Railway and is merger between the China CNR and CSR or a major railway producer.

The company has benefited from China’s decision to build high speed railways first with suppliers Alstom, Siemens, Bombarider and Kawasaki Heavy Industries. In an article wrtitten by Nathan Vanderklippe and Nicolas Van Praet titled In Their Tracks (June 10) describes the Chinese policies since 2000. The Chinese companies were merger, the large railway companies suppliers were allowed contracts with the railway on the condition they show their designs and train Chinese in the production of railways and railcars. The Chinese are now doing rail projects around the world and bidding less than the private companies. This has done two things one aroused the private companies who work with their governments (building rail cars provides internal jobs; export opportunities, etc). have been having discussions with their governments about Chinese work as well as shake up essentially a semi-monopoly situation. The buyers and sellers all know each other and along comes CRRC bidding at low prices. What should buyers do?

For American supplier companies such as Trinity Rail in Dallas which produces the majority of cargo-rail cars seen on the railways, disruption may be coming to the marketplace. For cities across the US such as Boston and New York have spent less money buying Chinese than traditional suppliers. The traditional suppliers are crying fowl for the bids were remarkably lower than their bids. One can read all the headlines of buy domestic and save jobs into the story.

Linking to dividend paying stocks, the freight railroads are not a problem and their stocks continue to be good holdings. The suppliers of the railroads are being disrupted by the Chinese and it is hard to move freight yards which means some jobs will be lost. Even safe and secure mature industries can easily be disrupted so it important to mointor your companies to ensure if they make profits and how do they do it?

There are more questions than answers, till the next time – to raising questions.