Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):
AHEAD OF THE TAPE: Shelter Fallout
Summary: One sector that does not seem to be slowing is the railroad industry -- in the first half, trailer and container activity on the nation's rail lines was up 6.4% from last year. Commodity movement (grains, coal, metals) was stronger last year. Union Pacific, which reports today, has seen its stock jump 36% in the past 12 months, while CSX is up 47% in that period. But there are signs of a slowdown, and the stocks have begun to slump a bit. The housing sector's weakness means less lumber movement; it was already down 2.1% y/y in the second quarter, and 3% in June. While Union Pacific receives only 6% of its revenues from lumber transport, other less-diversified players may be hit particularly badly.
Comment on related stocks/ETFs: Some of the smaller railroad stocks that could be hit hard by a slowdown: Norfolk Southern (NYSE:NSC), Burlington Northern Santa Fe (BNI), Kansas City Southern (NYSE:KSU) and Florida East Coast Industries (FLA). Speaking of lumber, Ashish Kelkar thinks timber stocks should outperform in an inflationary market.