Earlier this year, this industry took a big hit on concerns about the housing market, but on Thursday Union Pacific (UNP) proved the railroads can still make a lot of money moving fertilizer, coal and auto parts around this county. Here’s why you may have another chance to ride the rails.
Where the trucking industry is faltering, the rails have the opportunity to break out because of pricing power, said Guy Adami. Lots of activist investors, including Warren Buffett and Carl Icahn, are buying stakes in the rails and it never hurts to follow their lead. Guy and Karen recommended CSX (CSX) as the best in show.
Why do rails get the pricing power benefit over the trucking names? They use less fuel. Because they use less fuel, they can raise prices, which is exactly what Union Pacific did, Pete Najarain said. As long as there are commodities like coal and wheat that need hauling, the railroad companies will stay in business. He likes Burlington Northern (BNI) best.
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Trader disclosure: On Oct 18, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (INTC); Najarian Owns ( C), (GOOG)(CY); Najarian Owns (SNDK) Options; Finerman Owns (C), (GS); Finerman's Firm And Finerman Own (ASD), (KALU); Finerman's Firm Owns (NYX), (MSFT), (LTD), (BIIB), (BEAS), (COP), (TGT), (VMSI), (WMT); Finerman's Firm Owns S&P 500 Index Puts; Finerman's Firm Owns Russell 2000 Index Puts