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Norfolk Southern: Train Wreck Dead Ahead! (NSC)

Posted on June 10, 2021

Norfolk Southern (NYSE:NSC) comes under the microscope today, after a rise of 163% from her Batflu lows.

That’s not as big a jump as we’ve seen from other sectors, to be sure, but from a railroad it represents quite a surge.

That said, there’s now reason to worry.

The entire transport sector is presenting weakness against the Dow Industrials on a relative basis, and that tells a tale of a cooling economy – and market.

As for NSC, from a fundamental perspective, she’s posting as follows –

  • P/E is at an historical extreme of 30.46,
  • Dividend Yield is 1.44%,
  • Price to Book is also high at 4.73,
  • Earnings for the year are down 23.50%,
  • And insiders, whose understanding of the company’s workings is always sharpest, have offloaded 27.59% of their holdings ($34 million) in just the last six months.

Do they smell a wreck…?

Likely.

The daily chart offers ‘we the people’ ample reason to unload, as well.

We say this despite the post-Batflu pick-up in business, despite significant cost-cutting efforts (across the industry), despite the company’s adoption of a ‘Precision Scheduled Railroading’ (PSR) model, and despite dividend and buyback initiatives.

In our eyes, the chart speaks a container full.

Have a look –

The trade is considered SPECULATIVE, due to the relatively short time frame involved (seven weeks).

Pay close attention to expiries and strikes.

The G-d of Israel is pure kindness, friends.

Know Him always.

Many happy returns,

Matt McAbby

 

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