Trains can carry a lot more for a lot less than trucks, and in these days of stratospheric fuel prices, that's kept railroad companies among Wall Street's favorites. But trains run on diesel fuel, too, so how long can it last? Lee Klaskow, senior transportation and logistics analyst of Longbow Research, talked with CNBC about that.
"They get about 80 to 90 percent back from their fuel surcharges," he explained. "The only issue that they face is, there's a lag of anywhere between 30 and 45 days between the time that the price of fuel increases and the time they get that market price."
"We like companies with high exposure to coal, ag(riculture) and intermodal," he said. "We view those commodities as the 'holy trinity' of freight, because they're less cyclical and more defensive."
Klaskow likes Norfolk Southern and Burlington Northern Santa Fe for different reasons.
"Norfolk Southern we view as the only true value that's left in the railroad industry," he said. "They have a large exposure to the auto industry, and we don't have to tell you how weak that's been so far...but we expect that, in 2009, the automotive demand will be more normalized."
Burlington Northern Santa Fe is much closer to Klaskow's "holy trinity."
"About 72 percent of its revenues [are] tied to that," he said. "We view that as a defensive play and a great operator."
Neither Klaskow nor his firm own shares of Norfolk Southern or Burlington Northern Santa Fe, and his firm has no commercial relationships with either company.