Railroads are having a resurgence

by Darren

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

The best part of their newfound success is that it’s likely to last for awhile. Coal, in particular, is helping nation’s railways get profitable fast. Certain railway companies have added a ton of money to the bottom line by improving routing. The first expansion of a railroad in 100 years is in the works. That’s one century since this industry was making the big money and railroad barons helped form the US into a mighty nation.

You might find a bargain in the sector because profit taking has moved stocks lower.. A number of analysts are making rail stocks “holds”, so if you like to go contrary to what they say, you might find a pearl in this bunch.

What goes around comes around. The return of the rails almost makes you accept as fact this saying. If you wait long enough, everything comes back into style. And when it comes to hauling heavy freight, the rails are uniquely situated to perform the task at a lower cost basis than rivals. Trucking companies, in particular, are losing business every day to railroads, and are shipping more of their freight on trains as well.

The Burlington Northern Sante Fe Corp is doing quite well with their coal hauling in the Minnesota area. The company is mum on plans to secure a large tract of land for what looks like an expansion.. Selling at a forward P/E of around 13, this stock has some definite room to grow, especially if oil prices stay high for the next year or so.

You have two divergent viewpoints on the rails right now:

1) If the economy tanks, rails will get hurt.
2) Railroads will benefit even more from the global expansion of China and India (who will consume natural resources and heavy equipment).

Either way, BNI is in good shape. They plan on expanding their Intermodal business to 45% of revenues by 2010, so they should be well situated for either conclusion.

If you enjoyed this post, Grab the free Superior Investor Blog full RSS feed!.