Dr. Stoxx
Stock Trader & Author, Oxford DPhil, Trading Education
North American railroads are irreplaceable franchises, since land, permits and capital to build new ones don't exist, and a wave of mergers is reshaping the board. Union Pacific is best in class at a 59.6% operating ratio versus Norfolk Southern's 70.3%, a spread that is pure management and the core of their merger thesis. If that deal passes, BNSF's answer is CSX, a $100B-plus deal only Berkshire can fund in cash. Canadian Pacific Kansas City suits long-term compounding. x.com x.com x.com x.comÂ
Old Dominion and Saia look well placed as solid-balance-sheet LTL consolidators: such periods have historically been good for them, and FOX reports trucking bankruptcies amid surging diesel costs. At current valuations, they look roughly equally attractive. x.com x.comÂ
Railroads and energy stocks, a heavy-asset, low-obsolescence trade, work as a barbell to AI bottleneck names and are holding up in the selloff. Devon Energy, ConocoPhillips, Norfolk Southern and Union Pacific showed green in a sea of red. x.comÂ
UPS benefits the most from falling oil prices, which should come once Trump eventually reaches a deal with Iran and puts the conflict to bed. x.comÂ
FedEx Freight has significant upside on even a partial re-rating toward Old Dominion and Saia, as onshoring construction drives LTL demand. If housing reverts, demand could really amp up. Diesel costs are a concern, though FedEx Freight can add surcharges or raise rates in near real time, unlike garbage haulers Republic Services and Waste Management, which are locked into long-term municipal contracts. Tax-loss selling is the other risk, and the near term is hard to call. x.comÂ
Trucking and freight brokerage stocks look extended and expensive, pricing in an improbably steep earnings ramp. CDL licensing is tightening capacity and AI capex buildouts help areas such as flatbed, but J.B. Hunt trades near 30x next year's earnings. XPO is the most egregious, as less-than-truckload carriers will lag the upcycle while adding capacity. Landstar faces weak brokerage margins and platform pressure versus other public brokerages, before AI's effect on take rates. x.comÂ
The oil trade is over because crude can no longer make higher highs, even with Middle East crude exports back near their peaks. Oil is trading around its average price of the last eight months and set a lower high in September, so it is only a matter of time before the market gives up. Crude looks about to fall through the floor, with rates following and high-beta stocks then going vertical as every dip gets bought. x.com x.com x.comÂ
Walmart and Costco should gain as soaring diesel costs push consumers to trade down. Diesel is up 35% in 40 days and moves the trucks that stock every US shelf, and though America produces about as much oil as it uses, oil trades globally, so Europe's shortage hits US prices. Retailers must raise prices and lose volume or absorb costs and miss guidance. Discounters are big enough to absorb the shock and win trade-down shoppers; packaged food, staples and restaurants look best avoided. x.com … Show more
North American freight railroads own right-of-ways that would be impossible to recreate today, which makes them permanent holds. California's $126 billion-plus high-speed rail shows the cost: much of its spending goes, directly and indirectly, to securing right-of-way for just a few hundred miles in one state. Recreating that nationwide, especially in dense areas like CSX's East Coast, is impossible. Union Pacific is acquiring Norfolk Southern. x.com x.comÂ
Canadian Pacific Kansas City has a huge moat in long-distance North American freight as the only railroad running one connected line across Canada, the US and Mexico. Competitors must hand off freight at borders, switch carriers and deal with delays, while CPKC runs one network under one operator from north to south. It is a business to buy and hold for many years. x.comÂ