CSX Corp (CSX)

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.

Doesn’t want CP at 20 times earnings when he can have this one at 10 times earnings. This is the ugly duckling. It is a great opportunity. It is cheap by valuation metrics and another smart buyer back of shares.

Coal has been a problem for the rails. Utilities have been switching to natural gas. As well there has been a softness in China in steel production and this will be an impact for the next quarter or 2. She is looking for an entry point of $18.

A large railroad and is different from some of the others. Their exposure to coal is about 20% (greater than others) but their price reflects it. The US has better selection of companies in Rail Roads.

Likes the rail group as kind of a soft cyclical as they carry a lot of goods and traffic. As long as the economy is not going into recession, traffic and volume growth tends to be positive. Anything that is kind of cyclical she would wait until there is clarity on the fiscal cliff. There is no point rushing in.

Exposure to coal is 20% and so they have to offset that with other commodities. But we are not shipping as much as before. They are bringing their operating ratio down. An inexpensive stock compared to Canadian operators.

US rails are not expensive. This one is trading at about 11X with an operating ratio of about 71%. One of the problems with a lot of the rails is coal. Coal shipments are down.