One of my favorite parts of living in Sonoma, CA is going to the local market. I’m right in the heart of wine country so anything protein or produce is going to be off the charts. On the way out of the store on weekends and/or early in the week, it gives me a chance to glance at the papers and magazines. This happens much less frequently these days vs when I lived in New York City and could catch a peek at some of the cover stories every day and usually multiple times on every block.
So this weekend I’m walking out of the store double fisting sea bass (on my way to make Greek Carpaccio), and caught a quick glance at the Barron’s cover story which suggested selling Railroad stocks! I’m certainly not going to take the time to read what it says, but I saw enough to turn it into a blog post explaining why I want to take the other side. To be clear, I don’t mean to pick on Barron’s. They’re a legendary publication and quote me regularly. But that doesn’t mean we have to agree all the time.
Here is this weekend’s cover, for those who haven’t seen it:
Let me invite you to my world, where opinions don’t matter, only price does! Here is the S&P Railroad Index:
Click On Charts To Zoom In
The way I see it, Railroads started having trouble right as we entered the 4th quarter last year, as did a lot of the other leading stocks and sectors. That’s a big reason why we were so bearish. We are now back above that important point of reference for the bulls and bears. If we’re above 2030 in the Index how can we not be bullish railroads?
Looking at them relative to the rest of the market, it still looks like secular leadership to me. Here is the S&P Railroads Index relative to the S&P500 retesting the breakout last year. Resistance turning into support here is consistent with our constructive view on Rails and a classic example of Polarity:
I don’t like cherry picking covers, but I can’t help but remember this gem back in September of 2012. Facebook went up 1000% in less than a 6 years.
Will we see a repeat in Railroad Stocks? I think so! These are the ones we want to be buying: