Why Railroads Look Cheap

The following video is part of our "Motley Fool Conversations" series, in which Industrials Editor/Analyst Isaac Pino discusses topics across the investing world. In today's edition, Isaac comments on recent reports that indicate railroad traffic could continue to grow, making the stock prices on many of the carriers all the more attractive. During the month of May, durable goods orders were better-than-expected, driven mostly by higher transportation equipment purchases. Further, the economy was bolstered by vehicle purchases, which tend to translate to increased railroad volume across the country.

The third reason that Isaac believes in this sector deals with the strengths against competitors, like freight trucking. As the trucking sector continues to pursue class action lawsuits against the pricing power of the railroads, the railroads themselves continue to chug along. Click on the video below for further discussion.

Warren Buffett and Charlie Munger have heaped praises on the railroad sector over the past few years, but lately, Buffett's expressed enthusiasm about another undervalued industry. We've highlighted the companies Buffett would like to purchase in our recent free report: "The Stocks Only the Smartest Investors Are Buying." We invite you to download a free copy. To find out the name of the bank Buffett would probably be interested in if he could still invest in small banks, just click here.

Isaac Pino owns shares of CSX. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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