Dow Transports poised to close at an historic high. This is, at first glance, a play on airlines.
Why the airlines? Because they have turned their businesses around: 1) they have paid down debt, 2) mergers have increased, with more to come, 3) they have limited capacity, and 4) raised prices.
But the group to keep an eye on is railroads. They have a bigger market capitalization than airlines and, most notably, underperformed the S&P 500 last year.
Railroads have now become relative value plays.
In addition, railroads are plays on the U.S. economy in 2013...on cars, agriculture, and coal, so any downturn in outlook will affect their recent rally.