Union Pacific Corp (UNP)

The largest rail transportation company in the US. They cover 22 states (2/3rds of the country) covering the west coast. Everything from coal, grain, food, auto parts, etc. You are seeing accelerating growth for the US economy. 1.67% dividend yield.

He owns Burlington through BRK.A-T. Crude by rail has helped. Shipping of coal overseas has helped eastern rails. The stock is not cheap and he thinks there are better alternatives. Rails have a couple of years to go in this environment.

Most of the railways have done extremely well, whether in the US or in Canada. In a recovering economic state, these rails will continue to do well. They are not necessarily trading at very high valuations. Canadian Pacific (CP-T) is probably one of the better valued names at this point and you are not paying very high, 19 forward PE with a 13% 3 year projection in terms of long-term growth.

This has had a fantastic run in the last 12 months. He likes this and it is a great way to play the US recovery. Very broad based. Has a dividend profile and is a very good “buy and hold” and put it away.

Second-largest railroad company in the US. Have done a really good job over the last few years of controlling their costs, so their bottom line is actually growing faster than their top line. Operating ratio is 2 years ahead of schedule. Have good exposure to the crude by rail theme. Sees 20%-30% upside over the next 2 years based on a growth profitability outlook. Yield of 1.92%.

One of the best and biggest in its location, in terms of operating metrics. Its target is to even improve that and get to an operational margin ratio of 65% by 2017. Good opportunity to be able to drive growth with its exposure to the Mexican market. Dividend yield of 2.04%.

There are only about 7 Class 1 railroads in the US. This has the 2^nd lowest operating ratio at about 65%. Very shareholder friendly by raising their dividend by about 32%. Also, buy back a lot of shares. Good growth in intermodal. Own 26% of a Mexican railroad and there are a lot of new car plants growing in Mexico, so they will get their fair share of intermodal. Good balance sheet and dividend growth. Yield of 2.03%.

Has been very constructive on the transportation space. One thing that has been keeping him on the sidelines and trading more on the Sell side is that these stocks have had massive runs. Very richly valued which keeps him away from them. On a pull back, this is one of the names that he would be considering.

(Top Sell) Has had a good run but with a rising interest rate environment it will tend to underperform.