CSX Corp (CSX)

The market is speculating if CSX will merge with another railroad, but CS has only 3 years under this president to do it, since another president likely won't give that much latitude to an already-concentrated industry. And the Norfolk Southern-Union Pacific is hitting speed bumps. He wouldn't buy CSX based on takeover speculation, but on improving business. Yesterday's quarter: a modest top and bottom line miss, but strong operating metrics and a 1% YOY volume increase and offered a positive full-year forecast including revenue growth and operating margin expansion. CSX will do fine in a stagnant economy and be a big winner if the economy picks up.  

It is in shipping (barge) and rail. Although it is still a good company he swapped into CP Rail since it is good for the long term with a direct connection from Canada through the US.

Railroads are merging and Washington is approving them. There's talk that the same could happen to CSX. An activist shareholder is pushing for some kind of deal. Run by a great CEO.

Will benefit 6-8% from US tax cuts to come and a strong US economy. CSX reduced their share count by 34% in the last 10 years, while dividends have risen.

Last week, they reported a good quarter with stable volumes, up 1% YOY, led by automotives, chemicals (up 5%) and fertilizer (4%). Revenues beat, but earnings were down 8% over the year. Also, they raised guidance.

Run by a great CEO. The company is becoming more customer-oriented. He targets $40.

Really likes the rails, a cyclical group. CN, CP, CSX trade as a team. Transport is doing quite well, and the rails have a lot of leverage in their business models. Done a great job managing operating expenses.