Friday, May 29, 2009

Rails Get Some Breathing Room From Congress

Interesting development today as a bill which would go strip the rail industry from antitrust exemptions has lost some support.

  • A senator who co-sponsored legislation to strip the railroad industry of antitrust exemptions wants the U.S. Senate to delay action on the bill while he presses ahead with related reforms to the regulatory agency that oversees rail transportation.
  • The unexpected development comes just days before the railroad bill is scheduled for Senate debate and may give the railroad industry, which strongly opposes the bill, some breathing room to continue pressing for changes.
  • Despite his earlier support for the antitrust bill, Sen. John Rockefeller, D-W.Va., now is urging his colleagues to block the legislation.
  • Rockefeller said the legislation would undercut a different bill he is working on that would overhaul the Surface Transportation Board, the federal agency that regulates rail competition.
Rails stocks obviously like this update, and are responding. I do think there are plenty of headwinds for rails as they rely on strength in the broad economy to thrive, but they can survive under these conditions, and I do see value in their shares. I've been looking for weakness in shares to pick some up, and this isn't helping...

Disclosure: None


Bill G. said...

What do you think about CSX?

Michael said...

Hi Bill. Based on the research I've been doing, the eastern carriers (CSX and Norfolk Southern) carry a lot of autos which are taking a huge hit right now. I like the western carriers a bit better right now with their proximity to shipping to the pacific (china). They also haul a lot of coal from the powder river basin. Between BNI and UNP I like BNI a little better. They have actually gained a little market share this year. Buffett owns both but I think has a larger position in BNI. Here is a good article on the whole situation if you want some more details.

Also, here are some of the latest rail stats, showing market share and what products are most in demand.

Thanks Bill for the comment!

Bill G. said...

Hey Mike, thanks for the link to the seekingalpha article. Looks like BNI is the best bet. Been looking for railroad stock to add to my long-term holdings.


Michael said...

Hi Bill. I'm looking to pick up some BNI shares as well, and will post on the blog when I do so. I've been waiting for the market to correct a little, and it hasn't been happening. The rails rallying hard is evidence the market believes the broad economy is strengthening as rails cover so many sectors. Rails are also likely rising because oil is rising, and rails are a good alternative to shipping goods with trucks. This potential of congress not coming after them on the anti-trust stuff will help too, which is good, but not if you're like me trying to buy the stock at a better price! Thanks for the comment and good luck!