NEW YORK (TheStreet) -- The rail industry may seem about as old-fashioned as a capitalist enterprise can get, but rails are intricately linked to every aspect of today's economy. While this week's strike by engineers of Canadian National Railway (CNI) harkens back to the olden days, recent trend lines in the rail sector support a solid 21st century investment outlook.
It's not just cars of coal -- which are declining relative to intermodal transport in importance -- but market factors as far afield as online retail sales numbers and the need to move those Amazon.com and Walmart.com orders, and even a more green-friendly transportation future, which are fueling the rail sector. Warren Buffett's recent investment in Burlington Northern (BNI) added some intrigue, and confidence, to the story also. (Check out Warren Buffett's portfolio at Stockpickr.)
Most analysts think the track ahead looks positive for rails. The sequential increase in rail volumes between the second quarter and third quarter was one of the largest-ever on record, suggesting a recovery was well underway in what had been a disappointing volume story.
Meanwhile, the Berkshire Hathaway (BRK.A) acquisition of Burlington pumped a huge amount of money into the rail sector. In three weeks cumulative of Berkshire investments, the rails gained 22%. Which leads to the question: Even if the sector's long term outlook looks bright, has the sector become overheated?
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