Seeking Alpha

The polar vortex is a perfect storm for railroad stocks, J.P. Morgan says

  • Beneath this winter’s plentiful snow, railroads are emerging as a rare investment opportunity, J.P. Morgan analysts say.
  • The surge in demand for coal from U.S. power plants is pushing up coal prices, and coal is by far the biggest cargo carried on U.S. rails, accounting for 41% of all rail tonnage and 21% of rail gross revenue; J.P Morgan argues that at some point, coal should provide a positive catalyst for railroad company stocks since it accounts for so much of their revenue.
  • The firm likes eastern railroad plays CSX and Norfolk Southern (NSC) since their networks serve the highest concentration of coal-burning utilities in the part of the country hit hardest by the cold weather; Omaha-based Union Pacific (UNP) also is hauling a lot more coal as utilities rebuild their supplies.
Comments (45)
  • Back in the mid-late 1970s when the Florida citrus crop was destroyed by a long freezing spell, it was just called a "cold snap".


    But then again, we didn't have 24/7 news trying to desperately keep viewers for more than 1 hr per evening.


    On the other hand, automaton newscasters driviing up price on (NSC) is not helpful if timed when my dividends re-invest.
    22 Feb, 01:53 AM Reply Like
  • Both Norfolk and CSX just mentioned on conference calls that coal stockpiles were ahead of last year at utilities. I think this is probably a computer generated page view thing.
    22 Feb, 06:46 AM Reply Like
  • Was it coal stockpile for fuel or for transport? The analyst is saying there will be more coal transport business. Why would NSC or CSX need to stockpile coal besides for their own uses?
    22 Feb, 01:59 PM Reply Like
  • Well if JPM is getting behind railroads because of coal use, then it must be true...King Coal is not dead!
    22 Feb, 07:52 AM Reply Like
  • For now it's not, but for the long term be watching for the the cleaner alternative, Natty Gas to creep in. The US has lots and it seems inevitable that it will take a big of market share.
    23 Feb, 09:26 AM Reply Like
  • I'm always hesitant of any comments from a Banker. Whatever, they suggest, expect the opposite and unless they can separate Analysts from Trading, any comments should be lightly believed. Nonetheless, for Long-Term investors Rails are excellent holdings. Just be wary of any short term volatility that Bankers might be attempting to manipulate for personal gains.
    22 Feb, 08:29 AM Reply Like
  • Isn't JPM Johny-on-the-spot. These stocks began to take off in October and now winter is nearly over. Duh! Could it be JPM wants you to buy the shares they are about to sell?
    23 Feb, 08:49 AM Reply Like
  • i thought we didnt need coal anymore
    22 Feb, 08:36 AM Reply Like
  • I don't know if your comment was tic or not ; but, as of 2012, 36% of US electricity was generated by coal.
    22 Feb, 09:37 AM Reply Like
  • it was being sarcastic...coal isnt needed...coal is another windmill already!
    22 Feb, 11:58 AM Reply Like
  • But then in 2013, it was 40+%
    22 Feb, 02:05 PM Reply Like
  • Back on Jan 15 this was posted here on SA:


    "CSX Chairman/CEO Michael Ward says the results were supported by "the strength of an expanding economy," boosting overall volume by ~6% despite a 5% decline in coal volume."


    So has there been a big turn-around in the last month in coal?
    22 Feb, 09:29 AM Reply Like
  • Funny that this cold weather was being blamed for the slowing of rail traffic:

    "Rail Traffic is Starting to Soften
    By Cullen Roche · Comments (3) · Friday, February 21st, 2014


    The latest reading on rail traffic is showing some fairly substantial softening. The weekly reading in intermodal traffic came in at -5.7% which brings the 12 week moving average to just 1.7%. That’s the weakest reading since the middle of last year. On the whole, this is much more consistent with the muddle through economic environment we’ve been seeing."
    22 Feb, 09:34 AM Reply Like
  • Not wanting to disagree with anyone; but, a turnaround is possible. I think coal fired generation is held as backup for heavy demand situations. With the really cold weather the last two months those coal fired backup generators may be in heavy use. My personal electric bill doubled in, use Dec/pay Jan; and, it was up 50% for Jan/feb.
    22 Feb, 09:43 AM Reply Like
  • BearBait


    "Not wanting to disagree with anyone"


    C'mon man go for it.
    22 Feb, 02:22 PM Reply Like
  • I wonder how those other alternative energy forms are holding up. Wind turbines with ice, solar panels with a foot of snow on them, nuclear plants being constructed, how are those batteries doing in freezing weather, keeping you warm are they in the car?


    Coal in this country is still the big dog. It is in decline but we have a overseas/export potential. BHO may have a war on coal but coal is fighting back.
    22 Feb, 10:26 AM Reply Like
  • In another few days all the cold weather will be a distant memory. So Sell! Sell! Sell!
    22 Feb, 10:42 AM Reply Like
  • You hope winter isn't done yet. Also our poor energy policy of dirty coal will cause more problems. Us humans are bad people.
    22 Feb, 10:46 AM Reply Like
  • Enjoy your self-loathing a little longer. All forms of energy production save for geothermal have severe environmental impacts.


    Yes that includes solar, wind, and most hydroelectric.


    Cutting down down use is the only way to carry forward.
    22 Feb, 01:44 PM Reply Like
  • Very true, King Rat (great old movie with George Segal). That's why I'm a pro-nuclear power environmentalist, despite its obvious shortcomings. Coal is far from dead, as we'll be exporting it for use in other countries. That's why I'm glad I don't have any children and that I won't be around in another fifty years. Just wish we weren't taking so many other life forms on the planet down with us.
    22 Feb, 02:14 PM Reply Like
  • vireoman


    All fuels to create heat (and cold) have downsides. However if none of them were used we would all freeze; even the environmentalists, though they won't ever admit it.
    22 Feb, 02:26 PM Reply Like
  • If an environmentalist falls over in the woods and there is nobody there to hear it, do they make a noise?
    22 Feb, 03:37 PM Reply Like
  • vireoman, thank you. That shows our age I guess. It was also a book and the author was actually one of the characters in the story (revealed in the sequel).


    Alternative nuclear (thorium fuel or fusion reaction) are curious to me but I question why we need to put reactors on the sea coast and along fault lines just because "they need water". You'd think putting uranium/fission reactors deep in the mountains away from fault lines and surrounded by 20' thick concrete shell would be safer but what do I know?
    22 Feb, 04:13 PM Reply Like
  • deercreeks


    Only if Al gore is there to record it.
    22 Feb, 05:06 PM Reply Like
  • There are no mountains "away from fault lines". Mountains are *caused* by fault-line movements.
    22 Feb, 09:00 PM Reply Like
  • NonSurfer - you've just made my case for a moratorium on electing any more male politicians!!! (disclosure: Clinton/Warren 2016 supporter)
    23 Feb, 12:14 AM Reply Like
  • Mountains in my neck of the woods were caused by glaciers retreating and millions of years of weathering.


    The Pleistocene Epoch is recent as far as geologic time goes, occurring only 2.5 million years ago until 11 thousand years ago. During this time, the earth's climate changed with reduced temperatures leading to periods of glaciation. The northern sections of the Allegheny Plateau show signs of these glaciers. Glaciers cut into the top of the plateau and eroded the surrounding hills. The southern part of the plateau did not come into contact with the glaciers, though it was weathered by rain and snow.


    The formation of the Allegheny Plateau occurred on a time-scale that measures in the millions of years.
    23 Feb, 09:44 AM Reply Like
  • "The Appalachian Plateau of northwestern Pennsylvania consists of flat-lying sedimentary rocks that were at the far reaches of Appalachian mountain building events. Nevertheless, the Plateau rocks have recorded some of the tectonic stresses of the orogenic events in the forms of fractures, small-scale folds and faults, and a small percentages of internal strain."

    23 Feb, 12:42 PM Reply Like
  • Linking to Allegheny College, a place where I attended and played football, is a great one! A shout-out to the Gators.


    Northern Allegheny Mountains extend into WNY and this is where the glaciers carved out valley, mountains, and the Finger Lakes.


    Interesting side topic, IMO.


    Have a great day.
    23 Feb, 05:27 PM Reply Like
  • 2 page spread in Barron's this week end;interview with CSX's CEO. That should generate additional interest. Personally, though I own CSX,I have made more$$$ in TRN this year.
    22 Feb, 11:11 AM Reply Like
  • There may be a weather-based investing strategy, but I haven't heard of it yet.
    22 Feb, 02:56 PM Reply Like
  • Christ.....


    You obviously haven't purchased "Global Warming Investing" by Al Gore.
    Only kidding.
    22 Feb, 03:17 PM Reply Like
  • Weather traditionally was considered an economic factor of high importance. It's only in the past 8-10 years that it's been sidelined.
    22 Feb, 09:04 PM Reply Like
  • Considering the entire universe of stocks, tens of thousands of them, investing in the half dozen or so coal stocks is a rather low priority.
    22 Feb, 05:54 PM Reply Like
  • I thought we were a few weeks from spring. I had the impression fuel use dropped when the weather got warm. Does not sound like this unique opportunity for railroads has legs.
    22 Feb, 06:28 PM Reply Like
  • Exactly! I was just thinking the same and how short-term these analysts think. Ridiculous.
    22 Feb, 06:59 PM Reply Like
  • KSU recently had a nice drop, so would look into them as well, especially as a play on Mexico's emergent opening of their energy E&P market to foreign companies.
    22 Feb, 08:23 PM Reply Like
  • As long as they keep delaying the Keystone Pipeline, crude oil will be on rail too. Seems silly to me that oil on rail is a more environmentally friend mode of transporting oil. Politics I suspect. I'm placing bets on rail and the pipeline.
    23 Feb, 09:27 AM Reply Like
  • Please stop calling it a polar vortex. It's a made up term by the likes of people employed at The "Weather" Channel, who have graced us with naming winter storms and inventing faux terms for tornado's ( Tor Con) to scare people. WC is the laughing stock at the NWS to boot. Ask anyone.
    23 Feb, 09:39 AM Reply Like
  • re: "Ask anyone." ok, let's see...


    "Here are the facts as gathered from various sources including the National Weather Service, the National Oceanic and Atmospheric Administration (NOAA), and the American Meteorological Society:


    "The term Polar Vortex is not a new term or a new discovery. It was first described as early as 1853 and discovered in 1952 using radiosonde observations...."



    page 430, The Living Age, Volume 39, 1853

    23 Feb, 12:52 PM Reply Like
  • berbno


    It is winter.
    It is cold.
    Happens every for past eons.
    Who cares what you call it.
    23 Feb, 01:14 PM Reply Like
  • wyo - ...not you again? You've worn me out on WBS-MKN, so was looking elsewhere. The comment was addressed to OPie...who implied it was a recent made up term...which is not true. I already know you enjoy misrepresenting various info.
    23 Feb, 01:30 PM Reply Like
  • berbno


    Though it is a lost cause, I just try to keep you lefties honest.
    23 Feb, 01:52 PM Reply Like
  • "I just try to keep you lefties honest." ok, how do I express this slowly via keyboard?...OPie (like yourself) heard something on a Rush L. podcast and repeated it w/o DD. It is not true (opposite to honesty in my vocabulary). That is not keeping anybody honest. Yes it's winter, yes it's cold, yes it's been happening for eons. But the term is not a recent made up liberal hoax. It's setting a record high for this date, so I'm going outside now to enjoy it.
    23 Feb, 02:12 PM Reply Like
  • Don't watch NSC, but CSX has been speaking, for at least the past two years, about the construction of new container facilities because they hope the container business will be replacing all the lost coal traffic. Maybe this winter there was a spike/need for some domestic coal, but overall, CSX management seems to be investing their construction capital on developing container facilities. Until there is a change at the top in DC, coal is the ghost of Christmas past.
    24 Feb, 09:45 PM Reply Like
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