You've Got RAIL

One of my favorite types of purchases is a stock that I've already owned and sold for a profit. A lot of brain damage is saved from the fact that I already know the company. This is the case with FreightCar America (RAIL), shares of which I have previously purchased and sold as discussed here and here.

RAIL manufactures railcars, which is a highly cyclical business. Demand ebbs and flows, while costs are fixed. And so these stocks get heavily beaten down when the outlook is bleak.

As a result, RAIL is now a net-net, trading at $95 million with current assets of $210 million and total assets of $105 million. The company is also debt free, and $60 million of those current assets are comprised of cash and marketable securities. The company trades for less than half of its total tangible book value.

RAIL is cheaper than its competitors because its specialty has been coal cars, which are particularly out of favor at the moment. But the company has been diversifying into other types of cars. New management has been focused on improving quality and reducing defects and costs related to manufacturing different types of cars, which has led to losses in the short-term. Right now there is only enough backlog to keep the lights on for another couple of quarters, so one can understand why the market is spooked.

But with a rock solid balance sheet, I expect the company to outlast a downturn. I also think there is the possibility of a sale to a larger consolidator as the price must look very attractive to competitors at the present time.