My analysis of Union Pacific is accessible through my guest post at Dividend Power.
Class I railroads (UNP is one of 6) are generally a bellwether of economic growth and they are generally good at forecasting how different industrial sectors are likely to perform. This is because they receive input from their customers who need to ensure that the railroads can deliver their products in a timely manner. It makes no sense for grain producers, for example, to produce grain only to have the grain sit in silos because of a logistics oversight.
UNP's financial results will experience ebb and flows. Fortunately, its customer base is sufficiently diversified so a slump in coal shipments, for example, might be offset by strength in the petroleum and petrochemicals sectors.
My concern with UNP lies with its current valuation; it becomes increasingly difficult to generate a reasonable total rate of return when we purchase richly valued shares. The time to invest in decent companies is when they experience temporary headwinds and have fallen out of favor with many investors. Such does not currently seem to be the case with UNP.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long UNP.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation. I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
