The Road to Profits in 2020
Maxxwell A.R. is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Question: What accounts for 10% of domestic GDP production and is the fifth largest employment industry in the country?
Answer: transportation.
It is another blatantly obvious part of everyday life that resides in the family of non-obvious investments. But think about it -- Vast transportation networks contribute to economic growth around the world in countless ways, which makes investments tied to the industry a great way to make steady, long-term gains. While I cannot promise that the future of transportation includes the elusive flying car, I can be pretty sure the right investments will earn forward-thinking investors healthy returns. So, let’s take a look at several opportunities to profit from transportation in 2020.
Paving the way to a bright future
As of 2007 there were 2,615,870 miles of paved roads in the United States (and that doesn’t even include parking lots!), which means Kraton Performance Polymers (NYSE: KRA) has an enormous market to disrupt with its latest product. The company’s highly modified asphalt (HiMA) binder, which contains 8% SBS polymer, can be blended into bitumen to create a highly flexible and durable road surface. Traditionally, asphalt binders have reached SBS polymer limits of 3-4% due to the high viscosity that occurs when mixing. Kraton raised the bar two-fold by moving molecular groups around to reduce viscosity and increase laminar flow.
The technology is still a long way from changing how we pave our planet, but there were many positives reported during field tests. The company’s HiMA can be laid 18% thinner than traditional asphalt and still enjoy one-third of the rutting. This greatly increases the useful life of paved surfaces and reduces costs, which build up quickly over miles and miles of highway or roads. Kraton reported its first commercial shipment of HiMA in April, which should be the first in a long list of orders from cash-strapped municipalities and highway systems.
Don’t forget to charge your…car
Electric cars will certainly gain market share in the next eight years. Let’s be honest, most people don’t drive 160 miles in an average day – the minimum range for Tesla Motors’ (NASDAQ: TSLA) Model S – which makes EVs the perfect day-use car. Take your gas guzzler to visit your kids in college (if you can afford it in 2020).
So how will you charge your very first EV? NRG Energy (NYSE: NRG) has already figured that out – without the need for subsidies. Today you may write off NRG as “just another utility company,” but it has big plans for the future. The company’s eVgo network is a subscription-based at-home charger that also includes quick-charge stations in the Houston area. Eventually, NRG would like to expand to the other 15 states it provides with utilities. Perhaps they will one day serve the entire Lower 48 if they cash in on the future of EVs.
The long shot
If you think EVs are a far-fetched idea, then you won’t believe me when I tell you there is something even more far-fetched. But natural gas vehicles (NGVs) are just that. Although NGVs have enjoyed mild success in Europe (about 1.6 million on road by end of 2011, 10% of worldwide total) they have barely made ripples in the United States (112,000 on road by end of 2011). With the glut of natural gas weighing down on demand, I bet it’s only a matter of time before politicians give NGVs a serious look.
Any new mandates that attempt to foster growth in NGVs will surely help Clean Energy Fuels (NASDAQ: CLNE). The company has delivered nearly 800 million gallons of CNG and LNG, built over 150 fueling stations, maintains two LNG production facilities, and invested in two biomethane production plants. Why does it need help? Clean Energy currently focuses on bulk trucking and mass transit (bus) systems, but has a beautiful network that supports all NGVs. Unfortunately, that doesn’t mean much without domestic automakers helping out. Should NGVs gain traction publicly, privately, and politically, I wouldn’t be surprised to see European automakers cross the Atlantic to capture the early market. With an impressive amount of infrastructure already in place, Clean Energy would reap significant benefits.
Foolish bottom line
The necessity of transportation makes the long-term prospects for industries connected to it favorable for investors. There are many ways to look at its future – from fueling cars to paving highways. This post only scratched the surface of ground-based transportation, but what about transporting goods by air, sea, and space? Companies such as Kraton and NRG are developing potential first-mover technologies, which is the first step to building a competitive advantage. With 10% of domestic GDP to disrupt, these companies have a lot of growth ahead of them.
Did you enjoy this post? Follow me on Twitter to keep up with my future posts on value opportunities, energy, and sustainable chemicals @BlacknGoldFool.
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BlacknGold has no positions in the stocks mentioned above. The Motley Fool owns shares of Tesla Motors. Motley Fool newsletter services recommend Clean Energy Fuels and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
