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Stock Strategist Industry Reports

Railroads: The Ties That Bind

Despite low fuel prices pointing toward the contrary, railroads' competitive advantages remain strong against transportation rivals.

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As gas prices have dropped the past year, many investors likely theorized trucking firms would get a boost. After all, if these transportation companies and their drivers were spending less at the pump, their bottom lines should benefit.

That thinking, though, misses the broader investing picture, particularly when it comes to railroads. Rails such as  Union Pacific (UNP),  CSX (CSX), and  Norfolk Southern (NSC) enjoy an average fourfold cost advantage over most modes of transportation, regardless of the price of a barrel of oil.

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Rob Wherry does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.