On the buses, on the money, on the make…
December 27th, 2007 by moniesI recall it well both because it was an early punt and because a friend of mine told me I’d never make money out of a bus company. My heart sank at that, as we all like to receive peer approval for even the daftest moves. In any case I persevered through good times and bad with Stagecoach, buying more shares along the way and occasionally taking some profits too.
I can well recall how, about five or so years ago, Stagecoach looked headed for a complete smash and the stock fell to 10p, virtually penny share territory. I bought some at 15p and sold them after they’d trebled, thinking I’d done well. However, every time I look at the Stagecoach share price, now heading inexorably to the 200p mark on the back of last week’s excellent results, I wince.
In fact, it shouldn’t be too long now before it scales the heights it reached in the late 1990s when the City woke up to its potential and the remarkable personality of its co-founder, Brian Souter.
Now, having divested itself of its American operations and survived the various crises on Britain’s railways, Stagecoach is bashing the dividends out again. By now I think I’ve received the equivalent of my initial 1993 punt, so Stagecoach has proved a very fine example of what out to be the point of investing - getting sufficient returns to cover our initial investment plus some extra. Of course you have to be patient, but that is at least one case where a very traditional view of equities has been sound.
All through the post 9/11 slump I happily bought some other transport sector shares to go with my Stagecoach ones, building up my very own train set of stocks and shares. They were extraordinarily cheap then because of the general depression on the markets and because of all those troubles with Railtrack and the rest of it. Since then National Express, Go-Ahead and First Group have put me on the express route to riches, or at least a healthy paper profit. Now things are so good that the franchisees have to pay the Government for the privilege of running the trains. All thanks to Gordon Brown’s superb management of the economy and countless quarters of uninterrupted growth. (Can I have a job in the government too?)
So is it still a good time to ge t on the buses and the trains? I think so. The yields aren’t that juicy, but there’s a case for them on two grounds. First, we’ll probably see some more consolidation in the sector.
Public transport seems to have escaped the attentions of private equity and foreign investors, but I’m sure it will follow the electricity supply and water industries, with consequent uplifts for shareholders. Second, there’s the planet. A few years ago, when Stagecoach went public, it looked as if the public transport thing was doomed. No one in their right mind would travel like that if they could afford a car.
Still true, I fear, but the thrust of official policy is very much towards delivering John Prescott’s almost forgotten pledge to get us out of our cars and onto the buses. We won’t be doing this because we want to: we’ll be doing it because we’re forced to, whether simply because the congestion becomes unbearable or because local authorities introduce abominations such as road pricing or some combination of both. If that happens, as it surely will, then the only compensation I can think of is to look at the transport sector of the share pages on your morning bus/ train/ tube commute.
It really will be the only thing that could alleviate the misery. Buy Stagecoach shares, and think of them as an emotional hedge on losing the use of the Focus.
Author: Sean O’Grady
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