CSX Corp (CSX)

Trades at about 14X earnings. Have a great intermodal franchise. Expect there will be good earnings growth on the agricultural side, which was depressed last year. Dividend yield of 2.41% and have grown this in the last 3 years by about 23%.

Coal previously overhung the stock. He likes this stock in the $21-22 range. Thinks crude to rail story has legs. Decent dividend growth. There is only so much you can do in a commodity centered business. Prefers Union Pacific.

Prefers over Canadian railroads. A bit of a laggard because coal industry in US has been in decline. 11 times earnings vs. 18 times for Canadian. They have 3 years of backlogs awaiting them.

Is the old Chessy system railroad in the US. He is positive on railroads. If you thnk the US economy is picking up, then a railroad will also pick up. One difference between CSX and a Canadian railroad is they are tied in to coal shipments and that's been a little depressed. It's yield is 2.3% and has grown it's dividend 24% over the last 5 years.

Their only rail holding at the moment because it was the cheapest. About 1/2 the price of CP, so twice as likely to go up in his view.

Much cheaper than CNR in Canada, or CP. Great turn around but it has run ahead of itself.

Railroad. Trading at about 11-12 times earnings. Suffered a little because of a lot of their business has come from shipping coal and coal volumes have gone down dramatically. Domestic coal market has suffered from environment concerns and competition from natural gas. Export market has also dropped. Have replaced some of that with other businesses and are doing a pretty good job. Also, in a strong cost-cutting mode.

Likes the railroad group generally. Continues to take share from the trucking industry. This one is not his favourite. Canadian National (CNR-T) has lines that are far better and the unique feature of going east to west in Canada and north and south in the US.

This is the under performer in US rails because it is east coast and was highly coal. Reported 2 good quarters in a row now and raised the dividend. You are buying it about 35% cheaper than the Canadian rails.

Rail sector is one of the strongest groups in the market. Biggest driver for the industry is the increased car loadings for oil, petroleum products and chemicals, which the pipelines can’t handle. Prefers to focus on rails that are more specific to this theme. CSX is more focused on the East Coast. He would prefer the West Coast such as the Union Pacific (UNP-N) that benefits from oil rail car loadings, but also North-South trade between the US and Mexico. Would also consider Canadian National (CNR-T) and Canadian Pacific (CP-T).

Transporting coal, oil and gas is the story. That is what they are doing going forward. If they were to convert to Nat Gas they could actually reduce expenses. They are a good area to hold. If you are ok to see your stock dropping 20% for a while then it is ok to be in it.

US rails are cheaper than the Canadian ones. This is probably one of the cheapest of the US rails. Should give you a good, long-term return.

Rails are a core theme for him. They are a derivative of mid-stream energy assets because oil has to get to market and a bunch are shipping to market by rail. He prefers CP, closer to home.

Manufactures rail cars. If you are going to own a railway, he would own one in the US. This call is mainly based on currency. This is one of the best ones that is still available in the US. You are going to see increased shipping capacity. Be careful as everyone is jumping on the rails. Not super cheap and will go in the same direction as the overall economy.

Good company and well managed. Trying to drive their operating ratios down to about the 65% level. Low multiple and a lot of this is because of coal transportation that US rails do but a lot of this has fallen off in the last couple of years. Intermodal business is doing well.