Taking advantage of a conceptual and in some ways theoretical technology like Hyperloop can be difficult for investors. After all, we still do not know if Hyperloop will work or how it would really function nor do we know long it would take to build.
That being said, there are a few ways that investors can position themselves for the eventuality of Hyperloop fairly safely. Before we begin, I must advise people against investing in crowdfunded startup Hyperloop Transportation Technologies, or HTT. Those that put money into HTT right now will get nothing but a promise of stock in the future.
Since we know nothing about the company or its business model beyond the fact that it will try to build a Hyperloop and possibly test it at Quay Valley, California, there is no way for investors to know what they are buying. It could be the deal of the century or simply hype.
Fortunately, there are some genuine assets and equities out there that could profit from Hyperloop. This includes a few real-life publicly traded stocks you can buy right now, and some of those stocks are actually pretty good. There is a way that real estate investors can take advantage of Hyperloop.
Stocks That Could Profit from Hyperloop
Two publicly traded companies, Aecom (NYSE: ACM) and Oerlikon Leybold Vacuum or OC Oerlikon (OTC: OERLY), have joined HTT’s Quay Valley project. Buying shares of these companies would be a good way for an average person to invest in Hyperloop.
They are publicly traded companies that publish financial numbers; more importantly, Hyperloop is only one of many projects they are involved in. If it does not work, they will still make money elsewhere. If Hyperloop fails, HTT investors will be left with nothing.
Aecom is a large engineering company with a lot of experience in rail projects. That includes Crossrail, an improved series of rail tunnels under London that could be a model for a Hyperloop system in cities like New York or Washington, DC, and the Alameda Corridor freight railroad project in Los Angeles.
Aecom’s revenues have been growing significantly. It reported $8.357 billion in revenue in September 2014 that grew to $17.97 billion in September 2015. That means it is not a bad long-term growth play, although it did did not make money off that revenue. It reported a net income of -119.37 million.
OC Oerlikon could be in a much better position to cash in because it manufactures vacuum technology. At the end of the day, Hyperloop is a vacuum system. Since the company is based in Switzerland, it is hard to get a complete picture of its financial numbers, although Oerlikon did make money. It did report TTM revenues of $3.447 billion and an income of $171.22 million on June 30, 2015. Since Oerlikon manufactures the basic technology behind Hyperloop, it could be a good long-term value play here.
How Railroad Investors and Value Investors Can Profit from Hyperloop
Beyond these two stocks, I think the best play for investors that believe in Hyperloop would be railroad stocks. The reason here is obvious: The Hyperloop will have to run somewhere, and railroads already own the routes and the railyards that could serve as the Hyperloop terminals. They also already reach the ports and industrial areas Hyperloop will need to serve.
Publicly traded railroads include the following:
- Union Pacific (NYSE: UNP)
- Kansas City Southern (NYSE: KSU)
- CSX (NYSE: CSX)
- Norfolk Southern (NYSE: NSC)
- Canadian National Railway (NYSE: CNI)
- Canadian Pacific (NYSE: CP)
- Berkshire Hathaway (NYSE: BRK.B), which owns the Burlington Northern Santa Fe, or BNSF, rail system.
Obviously, the best investment here is Warren Buffett’s Berkshire Hathaway. Its BNSF controls at least three major rail lines that connect the West Coast with Chicago and many other rail lines. I also like the Union Pacific, which connects the Midwest and the Pacific Coast and the Kansas City Southern, which owns major rail lines in Mexico as well as the USA.
Any of these companies would be a great Hyperloop play because Hyperloop will have to run somewhere. Investing in them is a great value play because freight will have to move whether or not Hyperloop gets built. If Hyperloop gets built, it will probably have to follow existing railroad routes and quite probably be operated by the railroads, which have the logistics expertise.
Once again, Warren Buffett’s genius is exposed. By buying BNSF, Uncle Warren got a profitable transportation system and the routes for future transportation—pretty smart and a good lesson for investors with imagination. According to some reports, the biggest problem Elon Musk and his geniuses had when designing Hyperloop was finding routes for it. Buffett and the railroads have solved that problem.
A Few More Hyperloop Stocks
There are a few more publicly traded companies that might benefit from Hyperloop. These include:
- Elon Musk’s overpriced auto company, Tesla Motors (NASDAQ: TSLA), which manufactures the electric motors that could power Hyperloop.
- Musk’s solar panel manufacturer, SolarCity (NASDAQ: SCTY). Current designs call for the system to be powered by solar panels on it. Guess who would make them: other solar panel makers like Panasonic (OTC: PCRFY).
- Large technology companies like Siemens (OTC: SMAWF) and General Electric (NYSE: GE), which could manufacture a lot of the infrastructure needed for the system, including trains themselves and turbines to make electricity.
Beyond these are any manufacturers of industrial equipment, welding equipment or heavy equipment, all which will be needed to build Hyperloop. The tubes will probably be made of steel and welded together for example.
How Real Estate Investors Could Profit from Hyperloop
The simplest and easiest way for real estate investors to profit from Hyperloop would be to look at the map. In particular, take a look at maps of America’s existing railroad and interstate highway systems rather than the fanciful Hyperloop concept maps I have seen online.
The routes followed by these transportation arteries will be the routes followed by Hyperloop. One reason for that is that nobody will have to buy any land to build Hyperloop on; another is that Hyperloop could simply be built next to many existing highways and rail lines without interfering with them. It is not hard to imagine Hyperloop running down the center of an interstate highway for example.
One way for real estate investors to take advantage of Hyperloop would be to look for communities with large areas of empty land along such arteries that are a few hundred miles from growing metropolitan areas. A perfect example of such a community would be Pueblo, Colorado, with lots of empty housing due south of Denver on I-25. Another possibility could be Scranton, Pennsylvania, due east of New York City and just north of Interstate 80. There are also Stockton and Fresno and other locations in California’s central valley, due east of the overcrowded and super expensive Bay Area.
Areas with lots of empty land a short distance from cities could also be valuable. Two regions worth examining are Barstow and Bakersfield, California. Another is Colorado City south of Pueblo, which is right off of Interstate 25.
How Hyperloop Will Create the Commuter Suburbs of the Future
Such areas could be the commuter suburbs of the future. As average people get priced out of many metropolitan regions, they will move there, particularly if Hyperloop provides cheap and fast transportation to jobs. Many great fortunes have been made by individuals taking advantage of the American desire for 2.5 bathrooms and a garage.
Finally, real estate investors could look for land around two proposed Hyperloop test facilities. The first is Hyperloop Transportation Inc.’s test track at the Apex Industrial Park in North Las Vegas, Nevada; the second is HTT’s facility at Quay Valley, California which is right off of Interstate 5. Since Quay Valley is supposed to be a city of 27,000, if it ever gets built, land around it could be valuable, especially if major housing developers move in.
Obviously, Hyperloop development is years away, but investors should remember that past transportation systems, including the interstate and railroads, made lots of formerly worthless land valuable.