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Railroad Stocks Build Up Steam

Though shares in rail carriers have outperformed the broader market, S&P has a neutral outlook on the industry. The only buy-rated name in the group: CSX

The Standard & Poor's 1500 Railroads subindustry index is the newest member of the high momentum list (see the full list at the end of this column), indicating that its trailing 12-month price performance is now in the top 10% of all subindustry indexes in the S&P 1500 (the combined S&P 500, S&P MidCap 400, and S&P SmallCap 600 indexes). Year-to-date through Feb. 8, the S&P Railroads index rose 4.9%, vs. a 9.1% decline for the S&P 1500. During 2007, this subindustry index gained 19.5%, vs. the broader market's climb of 3.2%.

Take a look at the accompanying chart. Remember, the jagged blue line represents the subindustry index's rolling 52-week price performance as compared with the 52-week performance for the S&P 1500. Any point above 100 indicates market outperformance over the prior year, while points below 100 indicate market underperformance. The red line is a rolling 39-week moving average, while the two green bands indicate one standard deviation above and below the index's 17-year mean relative strength.