As fun as it can be to find a homerun stock, the reality is that truly successful investors beat the market over time by consistently hitting singles.

TUTORIAL: Stock Basics

Well, the latest supply of single-hitting stocks is admittedly coming from an obscure industry. But, given the data we're seeing, we could see a long and wide streak of singles for quite some time here, even if the economy softens a little.

The industry? Maritime intermodal transportation. Don't laugh - it a great business to be in, and it's getting better every day.

You may have seen them without even realizing what they are. They're the giant boxes you see placed two high and two deep on a flatbed rail car, stacked by the dozens on a ship, or pulled one or two in a row behind a tractor trailer. The containers may travel by all three modes (road, rail, water), with the contents - once packed - never being touched until they're at their final destination.

Though one could argue "shipping is shipping," it's really not. The kinds of goods that need to be shipped can vary greatly, as can the kind of boat that can ship it. Take high-profile shipping name Navios Maritime (NYSE:NM) for example. It primarily operates tankers that haul huge, unbundled piles of iron ore and coal in the ship's hull - the ship is the container. These tankers can't effectively (if at all) haul intermodal boxes.

Danaos Corp. (NYSE:DAC), on the other hand, operates ships specifically designed to move intermodal containers by the hundreds, but can't transport anything like aggregate or oil in its boat hulls.

Container Ships Win, Tankers Lose
Many organizations are finding the latter - containers - to be an easier and cheaper mode of transportation despite a recent cost hike.

For instance, the cost to ship a box nearly doubled in 2010, while the rental cost of a tanker fell about 75% over the last twelve months, reaching two-year lows in February. Yet, the rising costs of box-shipping aren't expected to crimp demand or activity. In fact, container shipping is expected to grow by 8% in 2011, while dry bulk/tanker demand is expected to remain weak for the rest of the year.

The divergence between the two modes of shipping two-pronged. The first prong is a straight-forward lack of demand for dry bulk shipping, particularly from China, and evidenced by the Baltic Dry Index level (the average daily cost to charter a tanker) still being just slightly above multi-year lows.

The second prong is a simple case of oversupply. Though there are already too many tankers jockeying for too little business, even more of these boats are about to hit the high seas. In fact, some estimates suggest that 200 tankers are scheduled for 2011 delivery - this after 2010's 210 tankers were launched. All told, the globe's supertanker fleet has grown by 18% since 2009.

In contrast, container box shipping is holding up well, as demand for finished goods remains strong even if demand for raw materials is soft.

How to Play It
As tempting as all this data makes a container shipping company like Danaos or Global Ship Lease (NYSE:GSL) with its 17 ships, the shipping companies themselves aren't the low-risk/high-reliability way to tap into this obscure long-term trend. That honor belongs to the companies that actually lease out the big 20-foot containers.

It's an ideal scenario. The lessors have no particular vested stake in the profitability of the shipping company, nor in the parties buying or selling the goods. The lessors simply collect a fee as long as the boxes are being used, which is easy money when parked on a ship for days on end.

There are a small handful of these companies, but Textainer Group Holdings (NYSE:TGH) and TAL International Group (NYSE:TAL) are stand-outs. Neither one is a sexy homerun hitter, but both are reliable single and double hitters. Though both saw modest earnings slides when the recession was at its worst, neither Textainer nor TAL actually dipped into the red during that period. Throw in their decent dividend yields, and what you have is a sneaky, durable, and consistent winner few others are even thinking of. (A diversified portfolio will protect you in a tough market. Get some solid tips here! Check out 5 Tips For Diversifying Your Portfolio.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  2. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  3. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  4. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  5. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  6. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  7. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  8. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  9. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  10. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center