David Winters (Trades, Portfolio) is the founder of Wintergreen Fund (Trades, Portfolio) which began in October 2005. Before founding his own fund, he was chief executive officer and chief investment officer of Franklin Mutual Advisers. Winters is a value investor. He believes in holding solid companies for the long-term. He prefers to invest in companies that he thinks will do well in all market conditions, and avoids the current fad. Last quarter he initiated a position in CSX Corporation (CSX, Financial) by buying 292,455 shares of the company.
CSX Corporation is one of the nation's leading transportation companies. The company provides rail-based transportation services including traditional rail service and the transport of intermodal containers and trailers. CSX’s principal operating subsidiary, CSX Transportation, Inc., provides an important link to the transportation supply chain through its approximately 21,000 route mile rail network, which serves major population centers in 23 states east of the Mississippi River, the District of Columbia and the Canadian provinces of Ontario and Quebec. It has access to over 70 ocean, river and lake port terminals along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the St. Lawrence Seaway. The Company’s intermodal business links customers to railroads via trucks and terminals.
CSX Corporation has seen a good growth in its revenues and profitability over the last five years. In the last five years, the company’s revenues have risen by ~ 20% while its EPS has grown by more than 42% to $1.92 in FY2014. The company has also done a good job in terms of returning cash to the shareholders through dividends and buybacks. The company has increased its annual dividend to $0.63 in FY2014 versus $0.33 in FY2010. The company has also reduced its share count by over ~150 million since FY2010.
Going forward, analysts are expecting the company’s EPS to further increase to $2.06 in the current year and $2.29 next year. Its revenues are expected to decline 1.20% in the current year and grow 4.70% next year.
CSX Corporation is trading at a forward PE of 15.50 and has a dividend yield of 2.00%. According to GuruFocus’ DCF Calculator, the company has a business predictability rating of 4.5 stars and a margin of safety of 24%.
Out of 28 analysts covering the company, 11 have buy or strong buy ratings while seventeen have hold ratings. CSXCorporation is in the news recently due to rumours of Bill Ackman (Trades, Portfolio) acquiring a sizable stake in the company. If true, this may act as another catalyst for the stock. I believe the stock is a good buy at current levels given attractive valuations, good growth prospects and history of returning cash to the shareholders through dividends and buy backs.
