Burlington, CSX Lure Options Traders

OptionMonster co-founder Pete Najarian provides options picks Monday, Wednesday and Friday in TheStreet.com's Deep in the Money Calls newsletter.

Guy Adami, stocks editor at OptionMonster.

The railroads are attracting some attention today after Goldman Sachs(GS Quote) made some comments on the space this morning, especially on Burlington Northern Santa Fe (BNI Quote) and CSX (CSX Quote).

Burlington is a favorite of Warren Buffett and has gained roughly 50% since bottoming at $51 in early March. At more than $75 today, I think it has gotten a tad ahead of itself.

Valuations of 13.5 times trailing and forward earnings make it one of the richest stocks in the space. CSX, for example, trades around 11 times forward earnings.

Goldman upgraded CSX to "buy" from "neutral" and downgraded Burlington to "neutral" from "buy," essentially flip-flopping the two. At the same time, the bank raised its price target on Burlington to $85 from $73, while upping CSX to $40 from $36.

I'd rather own CSX for a couple reasons, valuation being the biggest one. I do think Burlington is a buy, but it's not far from its pivotal $70 level that Buffett sold puts against. I'd rather own it at that price but don't know if we'll get back down that far, so the entry point might be closer to $72 for Burlington.

In midday trading Burlington is down 1.6% to $75.66. CSX is up 1.2% to $34.95.