- As the largest manufacturer/lessor of rail cars used to transport Bakken oil, Trinity Industries' profitability is closely linked to the profitability of this field.
- If civil war reduces Iraqi oil output, Bakken oil becomes more important to North American oil security and the companies which produce it become more profitable.
- As a contrarian play, Trinity Industries benefits from Iraq to the extent that there is a greater demand for the product it transports and from having more financially secure customers.
With CNBC having just discovered the Iraqi conflict today and responded by giving it saturation 'what if' coverage, it's timely to consider what impact Iraq could have upon the North American transportation industry and upon Trinity Industries (NYSE:TRN).
Increased gas/oil prices are obviously not good for the car and airline industries and not initially good for railways though the latter do benefit when the price of gasoline reaches a point where shippers decide that it's more economical to ship by rail than by truck.
Even though Trinity Industries declined today along with the broader market, it should be viewed as a contrarian play in this environment.
As the largest manufacturer of rail cars used to transport sand to the Bakken and oil and gas from it, Trinity Industries could benefit from a reduced supply of world oil and higher prices to the extent that this increases dependence upon Bakken oil/gas and leads to its customers there becoming more profitable.
Trinity shares have had a difficult time during that past week and since an unexplainable 7.2% drop last Tuesday and Wednesday, though, and as a contrarian trade, Trinity could be one of a small group of companies which stands to benefit significantly from this conflict.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.