A Big Upgrade for CSX

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After more than a year at a four-star rank, rail transporter CSX (NYSE: CSX  ) has seen enough top-performing CAPS members come to the bullish side of its stock to upgrade it to five stars. A total of 1,657 members have given their opinion on CSX, with many of them offering analysis and commentary explaining the recent optimism.

While Warren Buffett made his bet on railroads when Berkshire Hathaway (NYSE: BRK-B  ) agreed to pick up the rest of Burlington Northern (NYSE: BNI  ) , many CAPS members believe CSX will also benefit from a stronger economy in future years. The railroad has seen signs of stabilization, believes that the worst is behind it, and is looking forward to a potential recovery.

CSX serves multiple industries including coal customers such as Arch Coal (NYSE: ACI  ) and Massey Energy (NYSE: MEE  ) , and despite a weaker coal environment, investors like the efficiency that the company has been achieving. Like peer Union Pacific (NYSE: UNP  ) , CSX reported a record third-quarter operating ratio by reducing operating costs by 24%, and is looking to emerge as a leaner company focused on long-term growth.

Rival Norfolk Southern (NYSE: NSC  ) has echoed CSX's belief that the economy bottomed in the second quarter, and CSX's core pricing remains strong and consistent with prior quarters. The speed of recovery is expected to depend largely on consumer spending, but many CAPS members believe that CSX is in a good position to benefit when it does. The company has consistently generated positive free cash flow in recent quarters and operates in an industry with a high barrier to entry.                   

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