Update - January 18, 2022

Riding the Rails to a Good Trade

Are you looking for a stock to buy today? Then check out one of the many winners in our portfolio.

CSX Corp. (CSX) is scheduled to open its books and reveal its latest profit figures on Thursday. As the company is one of our leading plays on rising inflation and the nation’s supply chain issues, I’m expecting a banner report.

Wall Street’s expectations for the major railroad are strong. It’s looking for earnings growth to jump by 17% from this time last year. And that growth will come thanks to a nearly equal-sized growth in sales.

There are several reasons the company is growing so quickly.

The first is the one that gets the most attention… the supply chain. You’ve surely heard about the backlogs, the shortages and the surging costs to move things from one place to another.

The problem is particularly acute for any process involving shipping containers. In normal times, these containers work well. They can easily be moved from a ship to a truck or a train.

These days, though, the ships are stuck at sea and the trucks can’t find drivers. In many cases, that’s making it cheaper and faster to stick a container on a train and send it up and down or across a continent that way.

It’s good news for CSX. Containers are the top item it moves… by a ratio of more than 3-to-1.

But there’s also the effect of a surging economy. Pent-up demand and all the cheap money in the pocket of the American consumer have created a buying frenzy. Again, you’ve surely heard of the demand-induced shortages across the country. Manufacturers are lining up to get their products out the door and to eager consumers.

It’s more good news for CSX.

And of course, it all leads to higher prices. With the surge in demand, rails were not only able to raise their prices… they had to raise them, just to curb demand. In some instances, prices have jumped by as much as 20%.

That’s big.

For large companies like CSX, these price hikes are big margin boosters. Fuel prices – despite some of the political rhetoric – largely remain near pre-pandemic levels. Employee costs are just starting to rise. And because of the long-term nature of CSX’s equipment, the company hasn’t yet had to absorb the inflationary effects flowing throughout the economy.

That means CSX is in quite a sweet spot.

It makes the stock a good short-term trade. The numbers this week are likely to be quite strong.

The stock also remains a strong long-term position, but if you’re looking for a quick move, grabbing some shares now with a tight stop price would be wise.

I’ll dig through the earnings report on Thursday and let you know what I see.

Note: Don’t forget about the free webinar I’ll be participating in tomorrow night. It’ll be hosted by my good friends Rich Checkan and Chris Blasi – two of the smartest precious metals investors on the planet. If you want our thoughts on gold, silver, the economy… and what to do next, be sure to tune in. Again, it’s entirely free, and it kicks off tomorrow at 7 p.m. ET. You can sign up here.