Big railroad stocks continue to outperform the broad market, and though this trend looks likely to continue, it’s now time to tighten stop levels and book profits on select open positions.
One of the best-performing industry groups since the October 2011 lows has been the railroads, which comes as a positive sign for the economic recovery. Though these stocks are generally considered to be defensive in nature, railroads should continue to benefit if crude oil prices stay at current high levels.
As a sector, the Dow Jones Railroads group has outperformed the Spyder Trust (SPY) by over 17% since October lows. In late October, there were three railroad stocks that I recommended buying, and though all three are up from the entry levels, stops now need to be adjusted and profits taken on one of the positions.
Chart Analysis: The Dow Jones Railroad Index tested the 2011 highs last week at 855 (line a), which was an all-time high. The weekly close convincingly above the late- October and December highs is positive.
Norfolk Southern Corp. (NSC) is a $25.7 billion company that currently yields 2.2%. NSC slightly exceeded the 2011 highs last week when it reached $78.50.