Today’s inspection of the particulars surrounding Westinghouse Air Brake Technologies Corp, or Wabtec Corp, (WAB NYSE) will conclude the assignment tasked by Dave on December 8, 2014. Wabtec manufactures a broad range of products for locomotives, freight cars and passenger transit vehicles. The company also builds new locomotives up to 4,000 horsepower and provides aftermarket services.
Much Like Greenbrier Companies Inc. (GBX NYSE) and American Rail Car Industries ( ARII Nasdaq), which were scrutinized earlier in the week for Dave, WAB is not a pure play on the transportation of crude oil by rail. However it does have a couple of sweet spots the others do not. All rail cars are equipped with air brakes which implies a broader market for the component. In addition one of the bottlenecks in rail transportation is the lack of locomotives to move an ever increasing volume of freight traveling by rail.
Burlington Northern Santa Fe Railway Company, which was acquired by Warren Buffett’s Berkshire Hathaway Inc. (BRK.A NYSE) in a $44 billion deal in 2009, plans on adding 350 new locomotives in 2015 after adding 500 in 2014. Other railway companies are also in the process of adding new locomotives to their fleets.
An examination of the charts will further my thoughts on WAB.
The three-year chart again illustrates a wealth generating advance that started in 2012 when the shares were trading below $35.00. The uptrend was breached in March of 2014 as the stock retested support at $70.00. A new leg up took the shares to a spike high above $86.00 by July and then attempted to break above resistance at $84.00. WAB pulled back starting in late September of 2014 but by October it retested support at $70.00 and caught a bounce to a 52-week high of $92.20.
The six-month chart depicts the retreat from the 52-week high and the support that has formed at $84.00. The MACD and the RSI are as of yet not signalling a buy. But the V bottom that has formed indicates that investors still have a strong appetite for these shares.
Of the three stocks Dave was considering WAB looks like the pick of the litter from a technical perspective. It would also be prudent to monitor support at $84.00 to ensure that it is maintained.
Make it a profitable day and happy capitalism!