Long railroad stocks

The sector is attracting money. What stock would be best to buy: GBX, GWR or UNP?
See the comparative Tables at the end of this post.

Of course, if the market pulls back, all will be in the red.
These trades are only valid if there is a market bounce.

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Note in the Figures below that four companies show a strong EV pattern (Including KSU)

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[B][U]Edit of June 8[/U][/B]

Below are two small tables that compare the three trade ideas.
The first table shows the evolution of the profits if the trades are kept for 5 Days, 10 days or 20 days.
Short term gains (normalized on a one year base) are always higher than long-term gains.

The second table is more interesting.

1. You can see that the GBX 5D/20D gain ratio is lower than for GWR. This is because GBX is a "trend following" trade, while "GWR" is a counter-trend trade. Hence, counter-trends might revert down and even might not last long. These counter trend trades are only valid for only narrow holding periods. UNP offers poor 5D and 20D gains.

2. GBX P/E ratio is lower (better value, which is probably the reason why it is well supported right now)

3. GBX displays a high short ratio, which are also a good support to prices.


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The downturn of railways was probably due to the reduction on oil by rail, as the collapse of oil prices made it uneconimical. This is despite the benefit railways enjoyed from lower fuel prices.
Lower oil prices also make it less beneficial to ship by rail compared to trucking.

Yes, indeed shale oil extraction and railroad prices have been linked.


Pascal