Motley Fool article about investing in NS

[zardoz]

http://www.fool.com/investing/general/2014/12/09/norfolk-southern-why-now-could-be-your-best-time-t.aspx

 

[Murphy Siding]

I always like reading the Motley Fool.  Maybe because I'm a fool.

This line from the article really says something about railroads: "As fuel costs for trucking and other less-efficient modes of transportation rose, railroads became the cost-effective alternative."

[petitnj]

Don't understand a word you say Murphy! Your auto correction is getting you. As for the Motley Crew article (sic), it is very typical of economic analysts to bring out specific items of a cost and try to draw conclusions. Unfortunately, a railroad is a complex business and isolating fuel costs is silly. If fuel costs rise, typically it is because the car numbers rise and thus profits rise. 

In additions, railroads are running at capacity and any turn-down in oil shipments will be replaced by grains, salt, concrete and all of the other products whose shipments have suffered due to railroad gridlock. 

I have no idea what the article's last paragraph is saying about "Moving from trains to automobiles". What? Are we going to ship coal in Ford Focus' trunks now that the car can read your e-mail? Motley Fool writes crap and this is a perfect example. 

[schlimm]

petitnj

I have no idea what the article's last paragraph is saying about "Moving from trains to automobiles". What? Are we going to ship coal in Ford Focus' trunks now that the car can read your e-mail? Motley Fool writes crap and this is a perfect example. 

It said nothing of the sort.  If you didn't understand the change in topic, try reading it again, instead of attacking the writer.

[Murphy Siding]

    Auto correction was on auto pilot.

     I like reading the Motley Fool for the entertainment value, not neccesarily for any kind of meaningful economic advice.

     I find it funny that they figured that the lowering of the ginormous cost of fuel to railroads was somehow bad for business.

[petitnj]

Sorry, no attack intended. I just said I couldn't read what you wrote! Where is the attack? 

[Murphy Siding]

petitnj

Sorry, no attack intended. I just said I couldn't read what you wrote! Where is the attack? 

 

  Huh? 

[Anonymous]

Norfolk Southern Corp closed at $104.08 today, down from its 52 week high of $117.64 on November 25^th, but up from its 52 week low of $87.14 on January 16, 2014. 

Most of the increase in the stock’s market value is attributable to sound business fundamentals, i.e. return on sales, equity, and assets as well as a manageable debt load.  The stock is priced fairly, and the forward looking numbers suggest that it will continue to perform reasonably well. 

It appears that some of the stock’s performance is due to the fact that NSC has been buying back its stock.  In 2013 it bought back $131 million more in common stock than it sold, thereby helping drive up the market value of the stock.  From 2010 through 2013 NSC bought back $429 million of its stock.  It has continued to buy back its common stock through the third quarter of 2014.

Securities analysis is a complex, dicey exercise.  In many respects predicting the future, especially the short term future, for equities is a fool’s game.  Hanging expectations on a small number of variables (fuel cost, oil shipments, etc.) is not a good idea. All of the key business variables (indicators) must be taken into consideration in valuing the current and future price of a stock.

 

[Ulrich]

I read the annual reports, the quarterly reports, and whatever else I can get my hands on  about Norfolk Southern.  On that basis I've come to the conclusion that they're a good solid business to invest in. My investment horizon is 10+ years out so I really don't care about day to day fluctuations in the stock or even sharp declines. If its a good business its a good business, and over the long term a good investment.  Having said that, though, when one buys stock in a company like NS one is really buying something over which one has no control whatsoever.. the purchase is really based on nothing more than hope and perhaps a vote of confidence in the current management. I prefer to buy small businesses whole... that way I have much more control over the outcome... but really... if you're going to buy stock in a public company one can do much worse than buying into Norfolk Southern. 

[Paul_D_North_Jr]

The article focuses mainly on the effect of falling fuel costs on NS' bottom line.

But a few weeks (months? ) back, in a thread here on a similar topic, a couple of the same posters pointed out that the fuel surcharge provisions of the tariffs may neutralize that benefit by compelling the railroad to give back or at least share those savings with the shippers. 

The article addressed that aspect of the issue not at all.  So, yeah - I'd say it was written by a contract-writer fool indeed !

- Paul North.   

EDIT: Fixed 2 typos.

[dakotafred]

Ulrich

I read the annual reports, the quarterly reports, and whatever else I can get my hands on  about Norfolk Southern.  On that basis I've come to the conclusion that they're a good solid business to invest in. My investment horizon is 10+ years out so I really don't care about day to day fluctuations in the stock or even sharp declines. If its a good business its a good business, and over the long term a good investment.  Having said that, though, when one buys stock in a company like NS one is really buying something over which one has no control whatsoever.. the purchase is really based on nothing more than hope and perhaps a vote of confidence in the current management. I prefer to buy small businesses whole... that way I have much more control over the outcome... but really... if you're going to buy stock in a public company one can do much worse than buying into Norfolk Southern.

I really don't know how you can wrong with any of the Class Ones -- with the hedge that the price on 6 of the Big 7 is pretty high right now. UP split a few months ago, and their price has increased up to 20 percent again already! (Only 16 percent as of today.)

A few years ago, my "homework" on CSX consisted of consulting a price that was so much cheaper than that of NS. So far, so good! (I know, talk to me after the next recession.)

[Ulrich]

I tend to agree, Fred, but one never knows what the future brings. No one predicted the fall in oil prices even three months ago.. yet here we are. I have alot of money tied up in rail stock, and I'm not worried because I'm not a gambler, and I know that these companies are good well managed companies. But there's no such thing as a sure thing... wars, famine and global warming are just a few of the wild cards... maybe everything will be okay. Or maybe we'll all be wearing grass skirts and throwing spears in 20 years. 

[narig01]

The one thing the article does not go into is other modes competition. Lower fuel prices are a boon to trucking companies. The place I have a problem with this article is retail diesel prices have not come down as fast as retail gasoline prices. I am not sure about what price railroads are paying for fuel.
NS has not been putting a lot of effort into coal as NS seems to view coal as a shrinking market.

Rgds IGN

[Ulrich]

Not that much of a boon for trucking companies. Freight rates have had a fuel surcharge component for at least 15 years now.. so the lower the fuel the lower the surcharge. In fact, now that lower oil prices are making the headlines some shippers are becoming dissatisfied with paying any surcharge at all... now there's pushback on the very idea of fuel surcharges.  And let's be honest... some fuel surcharges have been excessive.. now it is becoming harder to cheat.