CSX Corp (CSX-Q)

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.

He owns CNR-T over CP-T and CSX-Q in the US. CP-T is more grain and resource orientated -- East to West. CNR-T has more exposure to the US markets. He would hold if you own and wait for a pullback to buy more.

The CEO passed away. The railroad industry is bullish at the moment. Truckers are not allowed to drive 40 hours now. Trucking is becoming more expensive. Railroads are getting more market share and they continue to get more efficient. (Analysts’ price target is $81.09)

The rails have been on a spectacular run in this cycle. This one started down at its book value and now is close to 5 times book value. The best days are behind it. If the economy ever has a setback this stock could go down substantially.