Railroad Crossing: Top PowerRatings Upgrades for Investors

One stock appeared twice in our Long Term PowerRatings analysis for last week: Burlington Northern Santa Fe (BNI@BNI | Quote | Chart | News | PowerRating).

Today, one of Burlington Northern’s railroad brethren has joined the ranks of top Long Term PowerRatings stocks.

That stock is Union Pacific Corporation (UNP@UNP | Quote | Chart | News | PowerRating), which sits atop our list of today’s top PowerRatings upgrades.

Our Long Term PowerRatings Daily Upgrades list is a great place for active investors and long term traders to go to look for stocks that have just started to become attractive or – in some instances – have become even more attractive. This was the case with Union Pacific Corporation, which earned a Long Term PowerRating upgrade from 7 to 8.

Our research, looking at thousands of simulated stock trades between 1995 and 2007, tells us that stocks with Long Term PowerRatings of 8 have advantages in both reliability and performance compared to the average stock – which is what Union Pacific was only a few days ago. We found that stocks with Long Term PowerRatings of 8 were higher one year later more than 74% of the time. Compare that to the average stock’s reliability, given that the average stock was higher one year later less than 68% of the time.

In addition to reliability, stocks with Long Term PowerRatings of 8 tended to be better than average performers, as well. 8-rated stocks, according to our research, tended to gain approximately 17% on average after one year’s time. The average stock in contrast gained on average 12-13%. Over times, the difference between a portfolio of Long Term PowerRatings stocks and a portfolio filled with average stocks can be sizable.

Union Pacific is a member of the 5-rated Railroads Industry group, where it shares top billing with Burlington Northern Santa Fe. In addition to these two top rated stocks – and a host of stocks with average Long Term PowerRatings of 5 and 6, this industry group does include one stock that is notable for its low Long Term PowerRating. That stock is FreightCar America (RAIL | Quote | Chart | News | PowerRating) which has a Long Term PowerRating of 3. Stocks with Long Term PowerRatings of 3 have dramatically underperformed the average stock in our historical testing, being higher one year later less than 45% of the time and average a gain of approximately 8% on average after one year.

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