Everything Warren Buffett: NASDAQ: Riding the rails with Burlington, CSX-06/09/2009

Wednesday, June 10, 2009

NASDAQ: Riding the rails with Burlington, CSX-06/09/2009

commentary by: Guy Adami

The railroads are attracting some attention today after Goldman Sachs made some comments on the space this morning, especially on Burlington Northern and CSX.

Burlington Northern Chart BNI is a favorite of Warren Buffett, of course, and has gained roughly 50 percent since bottoming at $51 in early March. As it trades above $75 today, I think it has gotten a tad ahead of itself.

Valuations of 13.5 times trailing and forward earnings make it one of the richest stocks in the space. CSX, for example, trades around 11 times forward earnings.

Goldman upgraded CSX to "buy" from "neutral" and downgraded BNI to "neutral" from "buy," essentially flip-flopping the two. At the same time, the bank raised its price target on Burlington to $85 from $73, while upping CSX to $40 from $36.

I'd rather own CSX for a couple reasons, valuation being the biggest one. I do think BNI is a buy, but it's not far from its pivotal $70 level that Buffett sold puts against. I'd rather own it at that price but don't know if we'll get back down that far, so the an entry point might be closer to $72 for Burlington.

In midday trading BNI is down 1.68 percent to $75.60. CSX is up 0.78 percent to $34.80.

(A version of this post appeared on Advantage Point earlier today. Chart courtesy of tradeMONSTER.)