Cement. Railroads. Trucking. Steel. These aren?t sexy businesses, but they have something that adds to their appeal in the current investing climate: pricing power.

Unloved for years, old economy industries have piqued the interest of value-minded investors who say there?s a growing need for the goods and services they provide.

Asia?s humming economic growth is the most obvious factor, but there?s another point in their favour ? their own troubled pasts. Hard times have left only a few survivors in these deeply cyclical industries, so there?s not a lot of competition as business heats up. But there?s not much buzz about their future, either.

?If you were to get 1,000 investors together today and say, ?How many of you would like to hear about Burlington Northern Santa Fe?? you wouldn?t have many takers because the image of the railroad industry is based on what it used to be,? said Don Hodges, president of Hodges Capital Management in Dallas. ?But if they make money year to year, that image will improve.?

Flashback to the year ?00: Wall Street was bored with old economy stocks; growth and high-tech were an obsession. But as competition grew, pricing pressures developed, margins declined and it became more difficult for the new economy names to make money.

The legacy of that time can be seen in the communications industry today, where many players are scrabbling for the same business, and it?s unclear which will survive. There?s almost no doubt some will fail. Compare that with old-fashioned industries that for years had too much capacity. As these businesses flagged, their infrastructure declined and many companies went broke.

?My contrarious antenna goes up when I see areas of the market where price action is strong, where earnings trends have been favourable and Wall Street hasn?t jumped on board,? said Bernie Schaeffer, chairman of Schaeffer?s Investment Research in Cincinnati. ?Sometimes it takes a while between the time a beaten down industry starts to really regain its health and Wall Street re-orients its thinking ... and it?s in this environment that investors have opportunities for good returns.?

Wall Street hasn?t hurried to paste ?buy? ratings on these stocks, in part because many analysts believe rising demand for basic materials, pricing power commanded by railways and tightness in the trucking industry are temporary conditions. Some also think the stocks are already overvalued, a point Hodges and others dispute. But given the pace of global growth, economists say business is likely to be strong for a while.

?I think these conditions will linger,? said Michael Gregory, senior economist at BMO Nesbitt Burns of Chicago. ?While you could get a healthy correction ... we?re in a multiyear period where these industries are going to do very well. They probably don?t get the respect they deserve.? One thing that works in their favour is it?s likely to take much longer for competition to develop in these industries than it did among the high-tech concerns, because such a large infrastructure commitment is required.

<I>Source: Times of India</I>