Hedge Funds’ Favorite Railroad Stocks For Q4

#3 Kansas City Southern (NYSE:KSU)

– Hedge Funds with Long Positions (as of September 30): 40

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $1.45 billion

Kansas City Southern (NYSE:KSU)’s stock has plunged by more than 15% this month alone, extending its year-to-date losses to nearly 38%. The reason for this huge decline this month has been the disappointing revenue forecast the company’s CFO  revealed on December 2. Speaking at Credit Suisse (CS) industrials conference, Kansas City Southern (NYSE:KSU)’s CFO, Michael Upchurch, said that the company anticipates revenue for the fourth quarter of fiscal 2015 to fall at a high-single digit percentage from the same quarter last year. While the stock of the company remained flat during the July – September period, the number of funds with long positions increased by three and the aggregate value of hedge funds’ holdings in the company increased by $46 million. Scott Ferguson‘s Sachem Head Capital initiated a stake in Kansas City Southern during the third quarter by purchasing  over 1.5 million shares of the company.

#2 CSX Corporation (NYSE:CSX)

– Hedge Funds with Long Positions (as of September 30): 47

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $1.39 billion

After declining rapidly during the period between May and August this year, shares of CSX Corporation (NYSE:CSX) have remained relatively stable and traded entirely in the $25 – $30 range. Although the stock fell by 17% during the third quarter, its popularity among hedge funds remained largely intact during that period. The ownership of the company among funds covered by us declined by one and the aggregate value of hedge funds’ holdings also saw a meager decline of only 1.8% during the third quarter. On December 9, the company announced that it will voluntarily transfer its stock exchange listing from the New York Stock Exchange to NASDAQ. Billionaire James Dinan‘s York Capital Management made an over fivefold increase in its stake in CSX Corporation (NYSE:CSX) to 4.5 million shares during the third quarter.

#1 Union Pacific Corporation (NYSE:UNP)

– Hedge Funds with Long Positions (as of September 30): 55

– Aggregate Value of Hedge Funds’ Holdings (as of September 30): $1.51 billion

Finally, even after suffering a heavy decline in popularity among hedge funds during the July-September, with nine fewer funds reporting positions, Union Pacific Corporation (NYSE:UNP) still emerged as the favorite railroad stock among the funds we track at the end of September. Moreover, the aggregate value of investors’ holdings registered a a decline of 10.2% during the same period. Union Pacific Corporation has lost almost 35% of its market capitalization since the start of the year, but this decline has made its $0.55 per share quarterly dividend translate into an attractive annual dividend yield of 2.82% for a large-cap stock. On December 4, analysts at Bank of America downgraded the stock to ‘Neutral’ from ‘Buy’ and also lowered their price target to $87 from $102. First Eagle Investment Management bought over 1.8 million shares of Union Pacific Corporation during the third quarter and became its largest shareholder among funds tracked by us at the end of September.

Disclosure: None