Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Railroad Stocks

Railroad stocks are a group of equity securities representing publicly traded railroad companies that are based in North America. Within this group, companies are mostly largely capitalized with long operating histories.

Stocks the Broader Market Can’t Move Without

By for Profit Confidential

This Company Is a Barometer for the Whole MarketIt’s been a very choppy start to the year for stocks and with no real trend to latch onto, the news of the day is the catalyst for the trading action.

There is still a positive undercurrent in the equity market, and it’s evidenced, in part, by particular strength in a number of key stock indices. (See “If This Indicator Turns, the Stock Market’s in Trouble…”) But it’s also apparent in a number of leading stocks—the positions that led the stock market in its 2013 breakout performance.

One of these stocks that continue to be a standout and outperformer is Union Pacific Corporation (UNP), an old economy railroad stock that is very much a canary in the coalmine for the U.S. economy.

The railroad business has been exceptionally good the last few years. And if coal shipments have diminished, then oil and fracturing sand have made up the difference and then some.

But for regular freight, business conditions have been pretty decent, according to the railroad companies, and this is material news that rises above the noise. Vehicle shipments have been strong, which has helped a lot.

According to Union Pacific, in spite of what management referred to as significantly weaker coal shipments, volume growth and pricing gains in regular freight produced a record fourth-quarter operating ratio (a measure of profitability) of 65%.

The company reported that its fourth-quarter operating revenues grew seven percent to $5.6 billion, up from $5.25 billion in the same quarter of 2012. Management said that volume growth from agriculture, automotive, intermodal shipments, and industrial products more than offset declines in coal and chemicals…. Read More

What the “Microsoft Indicator” Says Now

By for Profit Confidential

Microsoft the Best Market Indicator at This TimeEarnings estimates for Microsoft Corporation (MSFT) are going up and the stock, which recently accelerated, finally looks like it has broken out of a 13-year consolidation.

Microsoft has been an income play for quite a while. Currently yielding three percent, the company’s forward price-to-earnings ratio is around 12.5 and is not dissimilar from many other blue chips.

Then there’s Intel Corporation (INTC). This company has been struggling for capital gains, but it’s yielding 3.6% and isn’t expensively priced.

What these technology companies illustrate so well is the business cycle, both in terms of operational growth and also as equity securities. Getting the cycle correct (the right place/stock at the right time) is the toughest thing for any investor or businessperson.

Regarding stocks, both Microsoft and Intel’s long-term charts clearly show how extremely overpriced their share prices were during the bull market of the 90s. Intel’s long-term stock chart is featured below:

INTC Intel Corp. Nasdaq GS Chart

Chart courtesy of www.StockCharts.com

The benefit of the very long term is that it provides a normalized but still decent rate of return with these kinds of stocks. No enterprise or investor can escape the business cycle, whether it is industry-specific, a local reality, or the general economy.

Railroad stocks have been super hot over the last several years, but for long periods of time, they were not. The solid dividend-payers that they are, you’d be hard-pressed to find Union Pacific Corporation (UNP) competing with Apple Inc. (AAPL) or Google Inc. (GOOG) for headlines.

I feel that stocks have broken out of their previous consolidation phase in favor of a new long-term cycle. But while last year’s stunning … Read More

Are These the Only Stocks That Will Surprise This Earnings Season?

By for Profit Confidential

Good News in These Old Economy StocksWith more and more companies reporting, earnings results are a mixed bag. There’s outperformance, underperformance, and some just plain awful sales results.

 Coach, Inc. (COH) got hit hard after the company missed consensus big-time on a dramatic drop in North American comparable store sales. The famous handbag manufacturer also said second-half domestic sales would fall comparatively. The company is experiencing significant competition; Michael Kors Holdings Limited (KORS) is an example.

 Abbott Laboratories (ABT) is a benchmark pharmaceutical stock. The company’s fourth-quarter revenues missed consensus, while earnings excluding special items matched the Street. The only saving grace for the stock was the company’s announcement that it plans to buy back $2.0 billion of its own shares this year. Buybacks are a strategy employed by all kinds of large-cap companies that can’t beat consensus estimates.

 Good news came from the railroad sector, and even if you aren’t interested in owning a railroad stock, what the industry reports is material to the U.S. economy and the domestic outlook.

 Norfolk Southern Corporation (NSC) generated earnings growth of 24% in the fourth quarter of 2013 to $513 million, or $1.64 per diluted share.

 The company said its fourth-quarter operating revenues grew a solid seven percent to $2.9 billion, with a 21% gain in chemical shipments, a 12% gain in metals and construction, and a 10% gain in automotive shipments. Coal was down only two percent, which was a surprise. The company experienced strong “crude by rail” shipments, as did other railroad companies.

 For all of 2013, the company’s operating revenues grew two percent to $11.3 billion on a three-percent gain in overall traffic.

 Annual earnings … Read More

Railroad Parts Supplier Set to Keep Ticking Higher

By for Profit Confidential

Railroad Parts Supplier to Maintain Momentum in 2014To illustrate the solid business conditions that exist in the railroad industry, Westinghouse Air Brake Technologies Corporation (WAB) is a company that’s growing and has been an excellent stock market investment.

Operating as Wabtec Corporation, which was created in 2009 with the merger of Westinghouse Air Brake Company and MotivePower Industries Inc., the stock has been in business since 1869.

Back then, George Westinghouse showed potential customers in the railroad industry the first air braking system for railcars. Three years later, he invented the first automatic air braking system, which would engage if a railcar got separated from the train. The first installation of this innovative technology was in 1872 on a Pennsylvania Railroad passenger train. The rest is a history of growth.

The company’s been doing very well recently, with a growing cash position (long-term debt also has been going up), rising shareholders’ equity, and solid sales and earnings growth for such a mature, old economy industry.

According to the company, its third quarter of 2013 saw sales grow 7.5% to $631.4 million, while earnings grew an impressive 17.4%. With virtually every railcar in North America using some of the company’s products, its strongest growth in the most recent quarter was in remanufacturing, overhauling, and build services.

Westinghouse has been an outstanding wealth creator for shareholders over the last 10 years. Like most other stocks, Westinghouse got beaten up during the financial crisis. But for the most part, this position has been a consistent performer, and I think it will continue to be a winner, with fundamentals in the railroad industry being so good. The company’s 10-year stock chart … Read More

Railroad Stock to Own for 10+ Years the Next in Series of Core Holdings?

By for Profit Confidential

Railroad Stock the Next Pick in Series of Core HoldingsOne of the bigger problems I find when identifying and highlighting great stocks is the fact that the most desirable investments have already been bid up tremendously by institutional investors. It is not an easy time to be a buyer of equities in this market, with valuations elevated and share prices at or near their highs.

But a professional investor or fund manager is constantly buying and selling stocks, because that’s what they’re paid to do. Clients don’t pay fees to have money sit in cash; they pay for performance.

One of the largest private equity investors is Bill Gates. His private investment firm, Cascade Investment LLC, holds a vast array of stocks, and he also has significant holdings in the Bill and Melinda Gates Foundation Trust.

One of the top holdings in both these entities is Berkshire Hathaway, Inc. (BRK). The other is Canadian National Railway Company (CNI), of which Bill Gates is the largest individual shareholder.

Just as in the healthcare sector, exposure to the transportation sector is a must in any equity market portfolio. I like Canadian National and Union Pacific Corporation (UNP), but I would likely lean toward Canadian National, if I had to favor just one. Among the group of railroad stocks, this company has outperformed them all over the last 15 years. (See “Winning Railroad Stock a Buying Opportunity?”)

The company’s rail transportation system is unique in that it crosses all of Canada, from the east coast to the west coast, but it also heads straight down through the heart of America to the Gulf Coast. It is a unique infrastructure, with … Read More

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Stocks the Broader Market Can’t Move Without

By for Profit Confidential

This Company Is a Barometer for the Whole MarketIt’s been a very choppy start to the year for stocks and with no real trend to latch onto, the news of the day is the catalyst for the trading action.

There is still a positive undercurrent in the equity market, and it’s evidenced, in part, by particular strength in a number of key stock indices. (See “If This Indicator Turns, the Stock Market’s in Trouble…”) But it’s also apparent in a number of leading stocks—the positions that led the stock market in its 2013 breakout performance.

One of these stocks that continue to be a standout and outperformer is Union Pacific Corporation (UNP), an old economy railroad stock that is very much a canary in the coalmine for the U.S. economy.

The railroad business has been exceptionally good the last few years. And if coal shipments have diminished, then oil and fracturing sand have made up the difference and then some.

But for regular freight, business conditions have been pretty decent, according to the railroad companies, and this is material news that rises above the noise. Vehicle shipments have been strong, which has helped a lot.

According to Union Pacific, in spite of what management referred to as significantly weaker coal shipments, volume growth and pricing gains in regular freight produced a record fourth-quarter operating ratio (a measure of profitability) of 65%.

The company reported that its fourth-quarter operating revenues grew seven percent to $5.6 billion, up from $5.25 billion in the same quarter of 2012. Management said that volume growth from agriculture, automotive, intermodal shipments, and industrial products more than offset declines in coal and chemicals…. Read More

What the “Microsoft Indicator” Says Now

By for Profit Confidential

Microsoft the Best Market Indicator at This TimeEarnings estimates for Microsoft Corporation (MSFT) are going up and the stock, which recently accelerated, finally looks like it has broken out of a 13-year consolidation.

Microsoft has been an income play for quite a while. Currently yielding three percent, the company’s forward price-to-earnings ratio is around 12.5 and is not dissimilar from many other blue chips.

Then there’s Intel Corporation (INTC). This company has been struggling for capital gains, but it’s yielding 3.6% and isn’t expensively priced.

What these technology companies illustrate so well is the business cycle, both in terms of operational growth and also as equity securities. Getting the cycle correct (the right place/stock at the right time) is the toughest thing for any investor or businessperson.

Regarding stocks, both Microsoft and Intel’s long-term charts clearly show how extremely overpriced their share prices were during the bull market of the 90s. Intel’s long-term stock chart is featured below:

INTC Intel Corp. Nasdaq GS Chart

Chart courtesy of www.StockCharts.com

The benefit of the very long term is that it provides a normalized but still decent rate of return with these kinds of stocks. No enterprise or investor can escape the business cycle, whether it is industry-specific, a local reality, or the general economy.

Railroad stocks have been super hot over the last several years, but for long periods of time, they were not. The solid dividend-payers that they are, you’d be hard-pressed to find Union Pacific Corporation (UNP) competing with Apple Inc. (AAPL) or Google Inc. (GOOG) for headlines.

I feel that stocks have broken out of their previous consolidation phase in favor of a new long-term cycle. But while last year’s stunning … Read More

Are These the Only Stocks That Will Surprise This Earnings Season?

By for Profit Confidential

Good News in These Old Economy StocksWith more and more companies reporting, earnings results are a mixed bag. There’s outperformance, underperformance, and some just plain awful sales results.

 Coach, Inc. (COH) got hit hard after the company missed consensus big-time on a dramatic drop in North American comparable store sales. The famous handbag manufacturer also said second-half domestic sales would fall comparatively. The company is experiencing significant competition; Michael Kors Holdings Limited (KORS) is an example.

 Abbott Laboratories (ABT) is a benchmark pharmaceutical stock. The company’s fourth-quarter revenues missed consensus, while earnings excluding special items matched the Street. The only saving grace for the stock was the company’s announcement that it plans to buy back $2.0 billion of its own shares this year. Buybacks are a strategy employed by all kinds of large-cap companies that can’t beat consensus estimates.

 Good news came from the railroad sector, and even if you aren’t interested in owning a railroad stock, what the industry reports is material to the U.S. economy and the domestic outlook.

 Norfolk Southern Corporation (NSC) generated earnings growth of 24% in the fourth quarter of 2013 to $513 million, or $1.64 per diluted share.

 The company said its fourth-quarter operating revenues grew a solid seven percent to $2.9 billion, with a 21% gain in chemical shipments, a 12% gain in metals and construction, and a 10% gain in automotive shipments. Coal was down only two percent, which was a surprise. The company experienced strong “crude by rail” shipments, as did other railroad companies.

 For all of 2013, the company’s operating revenues grew two percent to $11.3 billion on a three-percent gain in overall traffic.

 Annual earnings … Read More

Railroad Parts Supplier Set to Keep Ticking Higher

By for Profit Confidential

Railroad Parts Supplier to Maintain Momentum in 2014To illustrate the solid business conditions that exist in the railroad industry, Westinghouse Air Brake Technologies Corporation (WAB) is a company that’s growing and has been an excellent stock market investment.

Operating as Wabtec Corporation, which was created in 2009 with the merger of Westinghouse Air Brake Company and MotivePower Industries Inc., the stock has been in business since 1869.

Back then, George Westinghouse showed potential customers in the railroad industry the first air braking system for railcars. Three years later, he invented the first automatic air braking system, which would engage if a railcar got separated from the train. The first installation of this innovative technology was in 1872 on a Pennsylvania Railroad passenger train. The rest is a history of growth.

The company’s been doing very well recently, with a growing cash position (long-term debt also has been going up), rising shareholders’ equity, and solid sales and earnings growth for such a mature, old economy industry.

According to the company, its third quarter of 2013 saw sales grow 7.5% to $631.4 million, while earnings grew an impressive 17.4%. With virtually every railcar in North America using some of the company’s products, its strongest growth in the most recent quarter was in remanufacturing, overhauling, and build services.

Westinghouse has been an outstanding wealth creator for shareholders over the last 10 years. Like most other stocks, Westinghouse got beaten up during the financial crisis. But for the most part, this position has been a consistent performer, and I think it will continue to be a winner, with fundamentals in the railroad industry being so good. The company’s 10-year stock chart … Read More

Railroad Stock to Own for 10+ Years the Next in Series of Core Holdings?

By for Profit Confidential

Railroad Stock the Next Pick in Series of Core HoldingsOne of the bigger problems I find when identifying and highlighting great stocks is the fact that the most desirable investments have already been bid up tremendously by institutional investors. It is not an easy time to be a buyer of equities in this market, with valuations elevated and share prices at or near their highs.

But a professional investor or fund manager is constantly buying and selling stocks, because that’s what they’re paid to do. Clients don’t pay fees to have money sit in cash; they pay for performance.

One of the largest private equity investors is Bill Gates. His private investment firm, Cascade Investment LLC, holds a vast array of stocks, and he also has significant holdings in the Bill and Melinda Gates Foundation Trust.

One of the top holdings in both these entities is Berkshire Hathaway, Inc. (BRK). The other is Canadian National Railway Company (CNI), of which Bill Gates is the largest individual shareholder.

Just as in the healthcare sector, exposure to the transportation sector is a must in any equity market portfolio. I like Canadian National and Union Pacific Corporation (UNP), but I would likely lean toward Canadian National, if I had to favor just one. Among the group of railroad stocks, this company has outperformed them all over the last 15 years. (See “Winning Railroad Stock a Buying Opportunity?”)

The company’s rail transportation system is unique in that it crosses all of Canada, from the east coast to the west coast, but it also heads straight down through the heart of America to the Gulf Coast. It is a unique infrastructure, with … Read More

Dow Jones Transports Leading the Market?

By for Profit Confidential

economic indicatorThis market is definitely looking tired after such a strong run since mid-October.

The performance of transportation stocks has been noticeable this year. The Dow Jones Transportation Average has actually outperformed the NASDAQ Composite year-to-date. In my mind, when there’s leadership from this group, it’s a compelling, traditional bull market indicator. Countless component companies are pushing record highs.

Equally as impressive is the performance of the Russell 2000 index, which has pretty much mimicked the NASDAQ Composite over the last two years.

A divergence became apparent in the beginning of July, as the Dow Jones Industrial Average began underperforming the other indices. It’s as if investors upped their risk tolerance, willing to bet on more risky equity assets as they felt more comfortable being bullish on a stock market that’s already gone up.

Over the last 12 months, the Dow Jones Transportation Average has been the leading index (excluding biotechnology stocks, which aren’t comparable). While outperforming the Russell 2000 by a slim margin and the Dow Jones Industrial quite significantly, I think the Dow Jones Transportation Average remains the leading index going into 2014 and a great indicator for the broader market.

Among the railroad stocks that are included in the Dow Jones Transportation Average, Union Pacific Corporation (UNP) bounced back nicely higher over the last five weeks after experiencing a lasting price consolidation the past six months. It will be interesting to see if the stock can hold above its all-time record-high of $165.18. Doing so will be meaningful.

CSX Corporation (CSX) is also a component of the Dow Jones Transportation Average, and it, too, seems to have broken … Read More

Winning Railroad Stock a Buying Opportunity?

By for Profit Confidential

railroad stocksThe stock market has gone up tremendously and the pressure on interest rates will continue.

Among the many benchmark stocks that I follow, I’ve noticed 2014 Wall Street earnings estimates have been nudging higher.

In a role reversal, Union Pacific Corporation (UNP) has been taking a break, even though the company’s latest quarter was solid and earnings expectations have been boosted for next year.

This is perhaps a subtle indicator that the bull market in equities is moving away from the old economy names that led the run upward over the last couple of years. Most of the other railroad stocks are still pushing new highs. Union Pacific’s share price consolidation has been going on since May.

The company’s price action is definitely worth following now. There is very little value in the stock market today, but Union Pacific’s share price is not expensive; it has the lowest forward price-to-earnings ratio of the railroad group.

If the stock’s consolidation continues or there is a major price retrenchment, Union Pacific could be a buying opportunity for those interested in owning a railroad company.

I’m still inclined to believe that existing stock market winners like Union Pacific are worthy of consideration when prices are off their highs. With the expectation that U.S. economic growth is going to accelerate next year (compared to 2013), combined with a healthy balance sheet and good prospects for a dividend increase, Union Pacific’s coal and grain shipment problem is manageable.

The third quarter of 2013 saw the company report record financial results, as well as its best operating ratio at 64.8%. The company spent $575 million … Read More

My Two Favorite Railroad Stocks

By for Profit Confidential

My Two Favorite Railroad StocksReporting this week is one of my favorite benchmark stocks.

Union Pacific Corporation (UNP) is a railroad company that’s been a solid wealth creator in what’s been a resurgence of old economy stocks over the last several years.

Wall Street earnings estimates have been going down for Union Pacific for this year and next. But the company is still expected to post double-digit earnings growth in 2013 on an estimated five-percent gain in total revenues.

The company provided the marketplace with its own third-quarter guidance. Earnings per share are expected to be between $2.45 and $2.48, compared to $2.19 in the third quarter of 2012. Operating revenues are expected to grow 4.0%–4.5%.

The worry for Union Pacific and other railroad companies is coal. Low natural gas prices are eating away at the demand for coal, which is one of the principal commodities that railroads haul. Warmer weather is also an issue, and the company cited flooding in Colorado as also having an impact on coal shipments.

Union Pacific is typically conservative with its forecasting. But it’s possible that the recent winning streak for many railroad stocks could be coming to an end. Shipments of oil are way up, but not enough to offset declines in coal.

The Association of American Railroads said that 11 of the 20 commodity categories it tracks saw a year-over-year increase in carload in the month of September. The biggest carload gains were in crushed stone, sand, and gravel, followed by automobiles and parts, then petroleum and petroleum products.

September declines were in coal, down 2.7% to 12,894 carloads, and grain, down 11.3% to 8,627 carloads … Read More

Don’t Overlook This Mature Sector That’s Beating the Street

By for Profit Confidential

Don’t Overlook This Mature Sector That’s Beating the StreetLong-time readers of this column know of my affinity for railroad stocks. I like keeping things domestic; I like keeping things simple; and I like consistent growth—in revenues, earnings, and dividends.

Railroad stocks are benchmarks on the North American economy. What they report is real, definitely worthwhile noting, and a sort of canary in the coal mine for both the old economy and Main Street.

My top benchmarks and my two favorite railroad stocks are Union Pacific Corporation (UNP) and Canadian National Railway Company (CNI).

Another good one, CSX Corporation (CSX), which is based in Jacksonville, Florida, has 21,000 miles of track in 23 states, the District of Columbia, and two Canadian provinces. It reported solid earnings results that beat the Street.

It’s important to remember that a company like CSX is a mature business; you’re not going to get burgeoning biotech-like earnings growth from railroad stocks.

CSX reported a solid earnings of $535 million, or $0.52 per share, up about four percent nominally and six percent on an earnings-per-share basis from $512 million, or $0.49 a share, in the comparable quarter.

Revenues came in at $3.069 billion for a gain of about two percent from revenues of $3.012 billion in the second quarter of 2012.

The company’s cash position dropped approximately $360 million to $1.017 billion. Shareholders’ equity grew $660 million to $9.662 billion.

The company cited strength in chemical shipments and the continuing upward trend in railroad stocks. From the 2013 base, CSX expects to generate per-share earnings growth of between 10% and 15% through 2015—that’s a very solid expectation.

Railroad stocks started to soar just before … Read More

How Extraordinary Growth in Bakken Oil Is Revitalizing Railroads

By for Profit Confidential

Extraordinary Growth in Bakken Oil Is Revitalizing RailroadsChange in the railroad business is not something you expect, but it is happening with Bakken oil.

The Association of American Railroads (AAR) is the industry group for North American railroad stocks, and while all trade groups are to be taken with a grain of salt, you can garner insight on the U.S. economy by reading the AAR’s data.

Even if you aren’t interested in railroad stocks, business conditions for railroads are still very relevant. They remain the backbone of North America and the industrial economy.

According to the AAR, U.S. Class I railroad stocks originated a record 97,135 carloads of crude oil in the first quarter of 2013. This represents a gain of 20% from 81,122 carloads in the fourth quarter of 2012 and a substantial increase of 166% from 36,544 carloads originated in the first quarter of 2012.

While the shipment of oil—Bakken oil, in particular—is the source of renewed growth for railroad stocks, the numbers also reveal a flatness that coincides with the rest of the U.S. economy.

The AAR reported that in the first 21 weeks of 2013, U.S. railroad stocks reported volume of 5.8 million total carloads, down 1.8% from the comparable period in 2012. Total U.S. traffic for the first 21 weeks of 2013 was 10.8 million carloads and intermodal units, up 0.8% comparatively.

For the same period, Canadian railroads reported volume of 1.6 million carloads, up 2.3% comparatively, and 1.1 million intermodal units, up 4.7%.

Volume on Mexican railroads came in at 315,377 carloads, up nine percent, with 192,060 intermodal units, down 0.3% from last year.

Railroad stocks have been on a … Read More

Coal Under Threat by Low Natural Gas Prices; Will This Be the End for Railroad Stocks?

By for Profit Confidential

Be the End for Railroad StocksCoal is a gigantic problem.

Because 40% or so of total U.S. railroad tonnage is coal—the most important commodity for railroad stocks—the railroad sector is under threat by low natural gas prices.

According to the Association of American Railroads (AAR), the shipping of coal is responsible for about one in five railroad jobs.

One of the first railroad stocks to report its earnings this season was CSX Corporation (NYSE/CSX), based in Jacksonville, Florida. CSX’s numbers were flat, but it beat consensus.

CSX reported first-quarter revenues of $3.0 billion, with growth in merchandise, intermodal, and other sales offsetting a decline in coal shipments.

Earnings were a record $459 million, or $0.45 per share, compared to $449 million, or $0.43 per share. The company increased its quarterly dividend by seven percent and announced a new $1.0-billion share buyback program.

CSX said that it expects average annual earnings-per-share (EPS) growth of 10%–15% starting from the end of this year to 2015 (a positive). Earnings for fiscal 2013 are expected to be flat or down compared to 2012 (a negative, and below the previous average earnings estimate if that’s meaningful).

Among railroad stocks, CSX is less than half the value of Union Pacific Corporation (NYSE/UNP), which is my benchmark stock for the group.

The AAR releases a lot of statistics that are very useful, even outside the universe of railroad stocks. In 2012, railroads delivered 171,000 carloads of oil and petroleum products for a gain of 46% over 2011. This was less than the trade group previously expected.

According to the U.S. Energy Information Administration, U.S. crude oil production increased by a record … Read More

Keeping It Rolling—U.S. Energy Boom Good News for Railroad Stocks

By for Profit Confidential

U.S. Energy Boom Good News for Railroad StocksRailroad stocks as a group have returned to their 52-week highs. I like Union Pacific Corporation (NYSE/UNP) and Canadian National Railway Company (NYSE/CNI). They are the strongest of the group and are trading right at their all-time record highs.

These two companies are worth accumulating when they’re down. According to history, they are typically not down for long. Wall Street keeps edging their earnings estimates higher for 2013 and 2014. Railroad stocks are pretty good with their guidance.

Bakken oil (and natural gas) is a huge opportunity for the U.S. economy. The production boom is happening now, with all its benefits, disadvantages, and costs. But a lot of junior oil stocks playing this patch aren’t moving upward in the stock market in the face of weak oil prices. The Bakken oil boom itself is a counter play on rising prices.

Phillips 66 (NYSE/PSX), a real winner since being spun off from ConocoPhillips (NYSE/COP), recently announced it will ship Bakken oil from North Dakota to New Jersey by rail. According to the Association of American Railroads, in 2008, U.S. Class I railroads originated 9,500 carloads of crude oil. In 2011, the number was 66,000 carloads. The final number for 2012 is expected to exceed 200,000 carloads, and railroads are also expected to deliver large amounts of frac sand to drill sites. This is a seriously good trend for railroad stocks. The stock chart for Phillips 66 is featured below:

PSX Phillips 66 stock market chart

Chart courtesy of www.StockCharts.com

Of course, the Bakken oil boom has its consequences, and we’re not even talking environmentally. Make no mistake: big oil is not interested in U.S. energy independence. Its … Read More

This Old Economy Stock’s a Moneymaking Winner

By for Profit Confidential

Old Economy Stock’s a Moneymaking WinnerI’ve always liked railroad stocks; they are the backbone of North America, and they’re very good at making money. Often in this column we consider the stock market performance of Union Pacific Corporation (NYSE/UNP). I firmly believe that this company will continue to be a winner for investors.

As part of an ongoing series in this column, we’ve been looking at some of the best long-term performers the stock market has to offer. So far, we’ve considered PepsiCo, Inc. (NYSE/PEP), Union Pacific, and Colgate-Palmolive Company (NYSE/CL). While a track record can’t tell you where a stock is going to go in the future, for me, it lends a lot of weight to making a new investment decision. What I’m trying to find are great, dividend paying stocks that investors can accumulate when they’re down. If a stock has a history of recovering strongly from periods of price weakness, this lends a lot of credibility to its story.

Looking at railroad stocks specifically, one of the best-performing companies on the stock market has been Canadian National Railway Company (NYSE/CNI), which trades on both the New York and Toronto stock exchanges. Among railroad stocks, this company’s long-term wealth creation on the stock market is unmatched. The company’s dividend yield isn’t as large as other railroad stocks, but its capital gains are very impressive. The company’s stock chart is featured below:

Canadian National Railway Company Chart

Chart courtesy of www.StockCharts.com

This stock has basically been going straight up since the stock market correction in 2008/2009. On a split-adjusted basis, the stock was worth approximately $50.00 a share at the beginning of 2008, $20.00 a share in 2004, … Read More

Industrials Holding up Better Than Technology Stocks —the Consolidation Continues

By for Profit Confidential

Technology StocksThe stock market is pretty much on hold right now, and investors are making no real commitments, due to negotiations regarding the fiscal cliff and the U.S. debt ceiling. What’s clear, however, is that the stock market’s previous leadership, mostly among technology stocks, has vanished. Any material upside in share prices is going to be difficult without participation from these stocks.

The big one that stands out among technology stocks is Apple Inc. (NASDAQ/AAPL), which has really lost a lot of momentum. After hitting a high of $705.07 in September, the stock plummeted to below $530.00 a share. It bounced back last month, but it is struggling and may yet retest $530.00 a share by the end of the year. Apple’s stock chart is featured below:

AAPL Apple Nasdaq Stock Market Chart

 Chart courtesy of www.StockCharts.com

Technology stocks have been leading the broader stock market for the last couple of years, but leadership also came from the industrial sector, and Union Pacific Corporation (NYSE/UNP) is a benchmark Dow stock that seems to be rolling over. (See “Another Warning—Stock Market Leaders Are Turning!”)

Union Pacific is an important company to follow; it’s been a great performer up until now, and the railroad industry is often the canary in the coalmine for the rest of the economy. Technology stocks get all the headlines, but railroad stocks are truly the backbone of the U.S. economy.

Similar to Apple, Union Pacific hit a high on the stock market in September, reaching $129.27. The stock pulled back to $118.00, then made a decent recovery throughout October. Now, the stock is struggling to stay above $120.00 a share, and it … Read More

Slowing Economic Growth Bringing Down the Big Boys

By for Profit Confidential

 

Slowing Economic GrowthWe’re starting to see more of the impact of slowing economic growth, as several big-cap companies recently reduced their visibility for the year, citing declining growth rates in China and other emerging markets. The Procter & Gamble Company (NYSE/PG), McDonald’s Corporation (NYSE/MCD) and Adobe Systems Incorporated (NASDAQ/ADBE) are just a few of the companies saying that economic growth in emerging markets has dropped considerably, while business is very slow in the eurozone.

Recent stock market action has been less worrying concerning declining expectations for global economic growth; the stock market just experienced a correction because of this. Stock market trading action over the last two weeks has all to do with the Federal Reserve and the hope for more short-term stimulus. Slowing economic growth is a reality that multinational corporations will not be able to avoid, which is why it’s my preference that stock market investments be as domestic as possible. (I like railroad stocks in particular.)

Economic growth in the eurozone is pretty close to flat, while the U.S. economy should be able to squeak out a percent or two this year. The global economy could use a reacceleration in Chinese economic growth, and it’s likely that there will be more policy action from that country to help. Of course, China can afford to do so because it doesn’t have the sovereign debt problems of Western countries. The U.S. stock market now trades off Chinese economic news so any new stimulus measures from that country will boost domestic equity markets.

One company that always reports early is Oracle Corporation (NASDAQ/ORCL), which is one of the world’s largest … Read More

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

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