We recently compiled a list of the 7 Best Transportation Stocks To Invest In Now. In this article, we are going to take a look at where CSX Corporation (NASDAQ:CSX) stands against the other transportation stocks.
At the September meeting, the Fed decided to lower its target range for the federal funds rate by 0.5%, bringing it down to 4.75%-5%. The decision is based on progress toward reducing inflation, which remains somewhat elevated but is moving closer to the Fed’s 2% target.
This could be a good sign for the transportation industry as lower rates reduce borrowing costs which could help the industry to access cheaper financing. Moreover, lower rates usually encourage consumer spending and could strengthen the supply chain as lower rates improve manufacturing and trade activities.
Fed Chair Jerome Powell noted that the U.S. economy remains strong, with inflation easing significantly from its peak to an estimated 2.2% as of August, while the core PCE rose 2.7%.
Powell emphasized that while the labor market has cooled, with slower job gains and a higher unemployment rate, it is no longer a source of inflationary pressure. The Fed expects inflation to reach 2% in the coming years. It also noted that wage growth has moderated.
Transport Industry Growth Drivers: Manufacturing Output and Consumer Demand
According to a report by Atradius, global transportation and logistics are expected to grow steadily in the coming years, due to rising manufacturing output and consumer demand. The sector is projected to expand by 3.8% in 2024 and 4.0% in 2025, supported by a European recovery, which will strengthen the industry. Decreased oil and fuel prices should relieve some cost pressures, while the impact of the Red Sea crisis will keep freight rates high but likely moderate with the addition of new ships.
The U.S. sector is expected to expand by 2.7% in 2024, supported by strong consumer demand and infrastructure investments, while China’s logistics industry is forecasted to grow by 4.8% due to rising imports, exports, and e-commerce demand. India’s transportation sector is set for significant growth at 12%, fueled by increased middle-class spending. Japan’s industry will see 5.9% growth, driven by recovering industrial production.
On the other hand, in the Eurozone, transportation growth will be slower, at 0.6% in 2024, before accelerating to 2.7% in 2025, while Germany faces a 1.3% decline in 2024. The UK’s transport sector remains challenged by weak business sentiment and labor shortages.
Our Methodology
For this article, we used transportation ETFs to identify nearly 40 stocks and then narrowed our list to the 7 stocks most widely held by institutional investors. The best transportation stocks to invest in are listed in ascending order of their hedge fund sentiment, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A freight train moving through a rural landscape, its engine and numerous rail cars carrying the company’s cargo.
CSX Corporation (NASDAQ:CSX)
Number of Hedge Fund Holders: 65
CSX Corporation (NASDAQ:CSX) is an American holding company that focuses on rail transportation and real estate operations across North America. It was created in 1980 through the merger of Chessie System and Seaboard Coast Line Industries and has since evolved significantly over the decades.
The company’s rail network, known as CSX Transportation, spans about 20,000 route miles across 26 states, the District of Columbia, and parts of Canada, serving large population centers where nearly two-thirds of Americans reside. It also has access to over 70 port terminals along the Atlantic and Gulf Coasts, as well as connections to Pacific ports through partnerships with western railroads.
CSX (NASDAQ:CSX) is a shareholder-friendly company that has raised its dividend for the last two decades. As of September 20, the company has a dividend yield of 1.37%. This was also praised by Argus analyst John Eade, as reported by The Fly on August 19.
The analyst said that on a micro basis, the firm appreciates the company’s track record of increasing its dividend and buying back its stock. Eade maintained a Buy rating on the company stock with a $39 price target. He said that recent declines in CSX’s (NASDAQ:CSX) stock price present a good chance to buy shares. He believes that, overall, the rail industry is growing steadily compared to other transportation options.
CSX’s (NASDAQ:CSX) shares were held by 65 hedge funds in the second quarter, at a combined value of $3.5 billion. This makes the company the third best transportation stock to invest in. As of June 30, Fisher Asset Management holds the most prominent position in the company with 23.8 million shares, worth $796.1 million.
ClearBridge Investments stated the following regarding CSX Corporation (NASDAQ:CSX) in its first quarter 2024 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor for quarter, with U.S. electric utility Constellation Energy and U.S. rail operator CSX Corporation (NASDAQ:CSX) the lead performers. CSX runs the second-largest listed U.S.-centric railroad in terms of market cap, owning over 20,000 miles of track and operating across 23 states mostly on the East Coast. CSX was an outperformer as quarterly results demonstrated best-in-class adjusted operating margins combined with continued volume recovery, which has surpassed expectations.”
Overall CSX ranks 3rd on our list of the best transportation stocks to invest in now. While we acknowledge the potential of CSX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.