• 7 minutes Get First Access To The Oilprice App!
  • 11 minutes Japanese Refiners Load First Iran Oil Cargo Since U.S. Sanctions
  • 13 minutes Oil prices forecast
  • 17 minutes Renewables in US Set for Fast Growth
  • 12 hours Socialists want to exorcise the O&G demon by 2030
  • 15 hours Chinese FDI in U.S. Drops 90%: America's Clueless Tech Entrepreneurs
  • 6 hours Russian Message: Oil Price War With U.S. Would Be Too Costly
  • 18 hours Good Marriage And Bad Divorce: Germany's Merkel Wants Britain and EU To Divorce On Good Terms
  • 1 day Cheermongering about O&G in 2019
  • 8 hours Oil CEOs See Market Rebalancing as Outlook Blurred by China Risk
  • 2 days Duterte's New Madness: Philippine Senators Oppose President's Push To Lower Criminal Age To 9
  • 2 days North Sea Rocks Could Store Months Of Renewable Energy
  • 22 hours *Happy Dance* ... U.S. Shale Oil Slowdown
  • 12 hours WSJ: Gun Ownership on Rise in Europe After Terror Attacks, Sexual Assaults
  • 1 day Oceans "Under Fire" Of Plastic Trash

Is It Time To Jump Aboard The Railroads?

Once a view takes hold among analysts and traders regarding a particular sector or industry it can be remarkably resilient.

Usually the view starts based on logic and reality, but once it becomes conventional wisdom cracks can begin to appear in both areas. Objectivity disappears when every piece of news or change in conditions is viewed only from the perspective of how it could be bad for the stocks, and that often leads to contradictions that border on the ridiculous.

The case against North American railroad stocks is an example. Obviously there are several factors that have caused the value of those companies to plummet.

First and foremost among them was the falling price of oil. By the middle of last year when WTI was up above $100/barrel railroad stocks were all the rage. The oil fields that were being developed by fracking in the U.S. were poorly served by pipelines and rail offered the best alternative. That led to an explosion of profit and what, with 20/20 hindsight, looks like a bubble in stocks in the railroad industry.

Once oil prices began to fall, though, that bubble burst with a resounding pop. All of a sudden, in addition to the threat posed by lower WTI, every analyst in the world started to focus on the potential negatives for railroads that had always been present but had, up to that point, been ignored. The interest rate hike that we know is coming will be bad for a capital intensive business like railroads, the U.S. economy started…

To read the full article

Please sign up and become a premium OilPrice.com member to gain access to read the full article.

RegisterLogin



Oilprice - The No. 1 Source for Oil & Energy News