Pittsburgh & West Virginia Railroad

[tucker]

Investment Rule #1: Never buy stock in a company that doesn’t exist.

Investment Rule #2: There is an exception to every rule.

Pittsburgh & West Virginia Railroad (PW)
Recent Price: $9.10 Revenue: $915,000
Market Cap: $13.73mil
EPS: $0.52
Shares Outstanding: 1.51mil
P/E: 17.74
Avg. Volume: 1197 (AMEX)
Dividend: $0.52
Book value: $6.08 Yield: 5.74%

Pittsburgh & West Virginia was once an independent railway that ran from Pittsburgh Junction, Ohio to Connellsville, Pennsylvania. The company operated 120 miles of main line road and an additional 20 miles of branch lines. The primary business was transporting coal from West Virginia to the steel mills of western Pennsylvania. However, with the decline of the US steel industry, the railroad began to founder. In 1964, Norfolk & Western bought all of the rolling stock belonging to the company, but Pittsburgh & West Virginia continued to own the land and track, which they rented to Norfolk & Western on a 99-year lease for $915,000 per year. When Norfolk & Western became Norfolk Southern in 1990, the new company subleased the land to the Wheeling & Lake Erie short line railway. Under the lease and sublease, Wheeling & Lake Erie manages and maintains the track, while Pittsburgh & West Virginia collects rent, making PW a real estate investment trust. Wheeling & Lake Erie can cancel the lease at any time, but that is unlikely to happen. The original 99-year lease did not include an adjustment for inflation, and Wheeling & Lake Erie gets quite a deal on the property as long as the track is needed.

From an ethical perspective, PW is probably as close to a “no impactâ€

[craig]

Tucker: what price would you consider PW to be at a discount? At that price what yield would that give us?

[tucker]

Currently I think PW woud be a buy at $9.08 including accrued dividends, resulting in a yield of 5.75%. However, since we are eyeing the stock for the Income Portfolio, I think it might be best to authorize a buy without setting a firm price. This would allow us to move money into or out of PW as its value changes relative to our other income holdings.