American Railcar Industries Inc. a case of two steps forward and one step back

Nov 29th, 2013 – Comment

The research conducted on your behalf revealed that Carl Icahn is a majority shareholder of ARRI if that provides any comfort.


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ARII LOGOHi Lou,

What is your opinion on American Railcar?

Thanks
Judy

 

 

 

Hey Judy,

 

Thanks for the assignment. American Railcar Industries Inc. (ARRI Nasdaq) earns 87% of its revenue from the manufacture of railcars used to move freight and liquids. They also offer fleet management services, railcar repair, and railcar parts. With more oil moving on rail the demand for tank cars has increased from 50,000 carloads in 2010 to over 700,000 in 2013. There are estimates that shipments of oil by rail could exceed one million carloads by 2015. Thats the good news.

The other side of the energy coin is that coal shipments are down as lower prices for natural gas and environmental concerns have thrown a wench into the demand for anthracite. At some point the bottlenecks that have pushed oil onto rail will be removed demanding a response but that seems to be some years in the future.

An examination of the charts will inform my opinion on ARRI.

 

ARII

The three- year chart paints the picture of a stock in an uptrend but with two significant retreats in February of 2012 and then in March of 2013. In both cases sell signals were generated by the MACD and the RSI. The momentum indicators also indicated that sellers were taking control of the market in mid November of 2013 as the shares retreated from a high close to $48.00

 

 

 

 

ARRI2

The six- month chart provides a close-up of the retreat that started in mid November and the trade down to near $40.00. The shares did catch a bounce off those levels and has now run into resistance at $44.00. The MACD and the RSI are both gently moving higher but have not generated a definitive buy signal.

If you are going to take a position in ARRI you should identify a trading strategy to capture profits when available and avoid the retreats that give rise to sleepless nights. The research conducted on your behalf revealed that Carl Icahn is a majority shareholder of ARRI if that provides any comfort.

 

Make it a profitable day and happy capitalism!

Categories: Railway
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