Jim Regan

Norfolk Southern - Why I'm Bullish

While I do like the rails, this analysis misses what is perhaps the most important point: location. There is a reason that I continue to reiterate UNP (and to a lesser extent, BNI) over names like Norfolk Southern... and that is that the Eastern region of the United States has been as slow as molasis with less of a sign of bottoming. UNP's CEO Jim Rogers has reiterated his belief that UNP's volume has troughed out... and they are much more efficient in maintaining workers for the eventual recovery (something NSC isn't handling as well). The west is the most dominant for the two number one cyclical and still-healthy deliverables: ag and coal. They deserve that premium spready (if not a heck of a lot more) over NSC for these reasons... so simply claiming that their valuation is better than the pack is not true.

Again, I think you did a very well and thourough job with this and I appreciate anyone who wants to pump the rails up as I think this is a terrific buy for the long run. However, please keep in mind what I have pointed out to you today as a potential hazard to your assumptions.

Regards,
-Jim Regan, BullishBankers.com