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CSX

What it does: CSX is one of the two major US freight railroads operating in the Eastern half of the USA.

By Stephen Wright. I’m almost certain that CSX (NASDAQ:CSX) won’t be the best-performing stock in the S&P 500 in 2025. But I think the chances of the company doing badly are extremely low. 

I’m expecting US industrial output to grow next year and that’s going to mean materials need to get moved around. Doing this by rail is cheaper and more environmentally friendly than trucks.

That’s not to say the business is invulnerable. Industrial action is one and storms damaging infrastructure that can be expensive to replace is another. 

CSX has dealt with both issues in 2024, though, and still performed well. I expect it to keep doing this, with regulation and costs limiting the threat of competition from other businesses. 

At 1.3%, the dividend yield isn’t huge. But add on a share buyback programme that has cut the shares outstanding by 4% per year over the last decade and I think things get very interesting.

Stephen Wright owns shares in CSX.

Snowflake 

What it does: Snowflake is a technology company that offers cloud computing and data analytics services via a software-as-a-service (SaaS) model. 

By Edward Sheldon, CFA. It wasn’t easy to pick my top US stock for 2025. That’s because there are so many world-class companies in the US today. But I’m going to go with Snowflake (NYSE: SNOW). It’s a software company that’s growing rapidly. 

I expect artificial intelligence (AI) to be a big theme again in 2025. And I reckon Snowflake will be a beneficiary. You see, it offers solutions that help organisations store and structure their data effectively. If firms are keen to use AI, getting their data right is the first step. 

Snowflake’s recent Q3 results were good. For the quarter, revenue was up 28% year on year. Meanwhile, net revenue retention rate was 127% (meaning that customers are spending more with the company). After these results, over 20 brokers raised their price targets for the stock. 

One factor behind the company’s recent performance is new CEO Sridhar Ramaswamy. He’s been working seven days a week to drive growth. Looking ahead, increased economic clarity should help the company achieve further growth. This backdrop should give firms more confidence to invest in tech solutions. 

I’ll point out that Snowflake has a lofty valuation. If growth slows for some reason (e.g. firms reduce spending on AI), the share price could be volatile. Taking a long-term view, however, I’m excited about the potential here. I’ve been adding to my position recently. 

Edward Sheldon owns shares in Snowflake.

Uber Technologies 

What it does: Uber is the world’s leading ride-hailing company.

By Ben McPoland. I reckon Uber Technologies (NYSE: UBER) stock is set up for a strong 2025.

After years of steep losses, the company finally turned profitable in 2023. This was after it exited underperforming overseas markets, cut costs, and disposed of non-core businesses.  

As a result, Uber is leaner and profits are set to motor higher in the years ahead. Indeed, between 2024 and 2026, earnings per share (EPS) are expected to almost double!

As I write, this puts the stock on a forward P/E ratio of 30, falling to around 22 by 2026. I see that as reasonable for a growing companywith 161m monthly active users – and counting – across its ride-hailing and meal delivery platforms.  

There are risks, of course. These mainly centre around increasing regulations and demands for higher wages among drivers.

However, I reckon investors could turn more bullish on driverless taxis. Uber has signed partnerships with 14 leading autonomous vehicle companies, while market leader Waymo is already doing tens of thousands of paid robotaxi trips per day (many through the Uber app) in a handful of US cities.

I think the stock’s worth considering for 2025 and beyond.

Ben McPoland owns shares in Uber.

The post Best US stocks to consider buying in 2025 appeared first on The Twelfth Magpie.

That’s about as long term as it gets. And while investors can’t buy shares in BNSF directly, I think other US railroads – such as CSX (NASDAQ:CSX) – look like good stocks to consider buying.

Buffett on railroads

Freight railroads like CSX move things like chemicals, commodities, and consumer products around the US. And Buffett’s probably right in thinking this will still be happening a century from now.

The only question is how and there’s a good case for thinking it will be by train. Right now, moving freight by rail’s significantly cheaper than putting it on a truck – the main alternative.

According to CSX, a truck can move a ton of freight 134 miles using a gallon of fuel. Its trains, by contrast, can manage 506 miles at the same cost.

That gives rail an important advantage over trucking when it comes to moving freight. And railroads also enjoy a lack of direct competition – each operator only has one major rival in its region.

CSX, shares the Eastern US with Norfolk Southern. And as Buffett notes, the cost and complication of building new rail infrastructure makes the emergence of new competitors highly unlikely.

This is why Buffett thinks BNSF’s a business that can endure for another century. And I think the key parts of the Berkshire Hathaway CEO’s thesis apply just as well to other US railroads, including CSX.

What are the risks?

Not everyone sees things this way. Back in 2020, Cathie Wood’s ARK Invest published a report saying it expects autonomous electric trucks to be taking market share from freight rails by 2025.

We haven’t reached 2025 yet, but it’s fair to say this hasn’t happened, so far. Nonetheless, the competitive landscape’s been shifting. Despite their cost advantage, railroads have been losing market share to trucks over the last 10 years. The reason is service has been poor – focused on margins instead of customers. 

The Surface Transportation Board’s also introduced reciprocal switching rules. As a result, if a rail operator falls below certain standards, they now risk losing their business to a competitor.

That means the likes of CSX are going to have to focus on improving their service to customers. And this might come at the expense of profit margins – which have historically been outstanding. 

This is clearly a risk, but I think it could also be positive. Improving service to avoid competition from other railroads could well put CSX in a position to reclaim market share lost to trucks.

Why I’ve been buying

With the appointment of Joe Hinrichs – a former Ford executive – CSX has already made a big move towards being responsive to the needs of its customers. I think this is very positive for the near term.

I also think the stock looks like good value and have been buying it. A price-to-earnings (P/E) ratio of 18 for a company in an industry Buffett thinks will still be going 100 years from now looks like a good deal to me.

The post Here’s the industry Warren Buffett says ‘is going to be around 100 years from now’ appeared first on The Twelfth Magpie.

The stock doesn’t jump out with a dividend yield of 1.43%. But I think there’s a lot more than meets the eye with this one.

Dividends vs passive income

Let’s start with the elephant in the room — that dividend yield isn’t going to grab the attention of income investors. But there’s more to passive income than dividends and CSX’s track record over the last decade’s a great illustration of this point.

The company’s been reducing its outstanding share count by around 4% a year through share buybacks. This has provided shareholders with an important income opportunity. 

By selling 4% of their shares each year, investors have been able to generate cash. And the declining share count means their stake in the overall business has remained the same. 

From an income perspective, that means there’s more to CSX than just a 1.43% dividend yield. The actual return available’s been closer to 5% on average, which is much more attractive. 

Reliable cash flows

Beyond the yield, there’s a lot to like about CSX from an investment perspective. It’s a freight railroad that makes money hauling commodities and finished products around the Eastern United States. 

The first thing to like is the lack of competition – only Norfolk Southern does the same thing. And the prohibitive cost and logistical difficulty of setting up another railroad means this isn’t likely to change. 

Another’s the offering to customers. Moving goods by this method’s a lot less carbon-intensive and a lot cheaper than trucking, making rails the only viable choice for a lot of bulk commodities. 

As a result, CSX maintains operating margins of around 38% – higher than the likes of Alphabet and Apple. That shows the power of a dominant position in an important industry. 

Volumes

The biggest risk with CSX is its exposure to coal, which makes up around 15% of revenues. And there’s no way around the issue that demand for this is set to fall as the US transitions to renewable energy.

It’s worth noting that a shift to cleaner energy sources might not be as bad as it sounds. For one thing, a lot of the coal CSX transports is exported to other countries where demand might be more robust. 

Furthermore, not all coal is used in power generation. Some is used in steelmaking and this is also likely to be relatively stable in terms of demand. 

Most importantly though, building renewable energy infrastructure’s going to need huge amounts of raw materials. And that’s going to have to be moved around – plausibly via rails and CSX’s network. 

A long-term investment

I see CSX as a terrific long-term investment. Despite the company’s huge margins, the stock trades at a price-to-earnings (P/E) ratio of around 15. 

For a business with a durable competitive advantage in an industry where demand looks strong, this is a powerful combination. That’s why I’ve been buying it for my Stocks and Shares ISA.

The post I’ve been buying shares in this under-the-radar passive income stock appeared first on The Twelfth Magpie.