The Avis ‘circus’ messed with the transports sector this year. Josh Brown finds the real Best Stocks in the space
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Transport stocks have had a wild year so far. Between the “liberation day” tariff threats and an anomalous event this spring that turned the Dow Transportation Average into a funhouse mirror, it’s been a “never a dull moment” situation. That said, the sector is up 43% over the past 12 months versus 29% for the S & P 500 . But the anomaly I referenced gives us a serious asterisk on the chart… The index spiked to nearly 24,000 in late April before collapsing just as fast, and it had nothing to do with freight demand or rail volumes. Avis Budget Group , a DJT component, ran from around $100 to nearly $850 in a matter of weeks after two hedge funds cornered the float and triggered one of the more extraordinary short squeezes in recent memory. The stock then crashed over 70% in two days when the company signaled a dilutive equity offering, and the index came right back down with it. Strip out the Avis circus, and the underlying sector was legitimately strong during that same window, with J.B. Hunt , Old Dominion , Ryder and Landstar all posting double-digit gains on actual fundamentals. The sector sold off hard on “liberation day” in early April 2025, recovered quickly, and several names are now either breaking out or setting up to do so. The stocks we are highlighting this week reflect that theme. Sean will get into our high-level Best Stocks in the Market stats and then we’re going to tell you some stories about CSX , NSC , UNP and XPO . Enjoy! As of May 26 , there are 183 names on The Best Stocks in the Market list. Top sector ranking: Top industries: Top 5 best stocks by relative strength: Sector spotlight: Transports CSX Corp. (CSX): Sean — We wrote about CSX right before Christmas last year, and that stock has left us feeling jolly all year long (sorry). We wrote about CSX on Dec. 22 . Here was Josh on the technicals: “Okay, let’s do CSX. This is a buy right now. CSX is in the middle of a textbook breakout and retest, with former resistance in the $35 – $36 zone now acting as support after the stock pushed decisively higher.” He goes on: “I like this setup both long and short-term. Traders can honor thy stops at $35.50 risking a point or so in potential downside. Feel free to give it a longer leash down to $33.50 — the Thanksgiving low — if you’re feeling more adventurous.” The stock is up 25% in total return since then, making it a top 15 industrial within the S & P 500 this year. CSX had a top-line deceleration coming out of fiscal year 2022, but growth is finally beginning to inflect higher. For Q1, revenue was up 2% year over year while operating income grew 20% and EPS grew 26%. This earnings growth was driven by margin expansion as operating margin expanded 560 basis points to 36%. As volume continues its steady increase, CSX is hyper-focused on cost. The business has over 100 efficiency projects underway, and the discipline seems to be paying off. Expenses in the first quarter were down 6%, and management raised full-year guidance to mid-single digit revenue growth. There has been a lot of transaction activity in the transports space and CSX is dipping its toes in too. After Union Pacific and Norfolk Southern announced their merger (we discuss this below), activist investor Ancora Holdings pushed CSX to either hire advisors for a transaction, find a merger or replace its CEO. Well, CSX now has a new CEO and a brand new partnership. Burlington Northern Santa Fe (BNSF) announced a coast-to-coast partnership with CSX, essentially replicating a merger without merging. As seen below, investors seem to like what they’re seeing. Josh — When we wrote up CSX in this column back in December, the stock was sitting at $36 in the middle of a textbook breakout and retest. The setup delivered. CSX has climbed nearly 30% since then, printing an all-time high just under $47 earlier this month before pulling back into its current consolidation. Throughout the entire move, price never came close to testing the rising 200-day moving average, now down at $38, which kept long-term investors in the stock the whole time. The next catalyst is straightforward: a clean break above $46-47 on volume clears the all-time high and opens up blue sky. RSI is currently 57, which looks fine in isolation, but the trend line in that pane deserves attention. Since February, RSI has been making lower highs while price has continued to grind higher. Lower highs are bad. That negative divergence is a yellow flag, not a stop sign, but it tells you momentum is fading at the margin. In a perfect world, RSI begins to rise, confirming price as it makes its way back up – but we don’t get the luxury of only trading in a perfect world. Traders who rode the December setup have earned the right to tighten their stops. The 50-day at $42.92 is the natural line in the sand. A close below it after a run like this would be meaningful and worth respecting. Investors with a longer horizon can give it more room down to $40, but the $42-43 zone is where the character of this chart changes. Above $47, the thesis accelerates. Until then, patience. If I were trading the stock (no position currently), I would take a half position here and double up on the breakout at $47. Norfolk Southern Corp. (NSC): Sean — Norfolk is another big rail operator with roughly 19,500 miles of track in the eastern portion of the U.S., hauling mostly industrial and agricultural goods. NSC is in the midst of a merger with Union Pacific, which would create a massive rail operator with tracks coast to coast. A regulatory decision is expected in the Summer of 2027. This combined railroad would have 39% market share of rail freight, according to their latest proposal. Under the terms, NSC would be acquired by Union Pacific at an implied value of $320, comprised of 72% UNP stock and 28% cash. NSC has had relatively flat revenues and margins, but looking ahead management expects to see volume and margin improvements led by chemicals, energy, and intermodals (shipping containers). Josh — We don’t buy stocks in the midst of mergers in this column nor do we engage in arbitrage. The stock is at $314 with an accepted buyout offer at $320. We don’t need those six points. Next! Union Pacific Corp. (UNP): Sean — Now to the acquirer. As it stands today, UNP is the largest railroad in North America by track miles, operating across 23 western states with 23,000 miles of track. UNP hauls about 30 billion pounds of freight every week, inclusive of agricultural products, industrial components and premium finished goods. In Q1, UNP hit a few operational milestones. Freight cars moved 9% faster, terminal dwell time (the time railcars were sitting and not hauling) improved 11% and fuel efficiency hit a new record. This led to an adjusted 9% EPS growth year over year, as 40 cents for every dollar of revenue was converted to operating profit. If the acquisition of NSC is approved in 2027, the merger would create America’s first transcontinental railroad, combining NSC’s eastern rails with UNP’s western rails. The combined company would generate roughly $36.4 billion in revenue and $18 billion in EBITDA, and would control about 40% of U.S. rail freight — comparable in scale to BNSF, a treasured asset owned by Berkshire Hathaway. The transaction is expected to generate synergies of $2B in additional EBITDA, including $1B in cost savings on operations and tech. On the volume side, the combined railroad would aim to add 1.4 million intermodal loads and over 400,000 carloads annually, while converting 10,000 interline routes (where customers currently have to deal with handoffs between railroads) into seamless single-line service. UNP CEO Jim Vena has been clear that the deal only happens if it’s accretive to shareholders, and that the company is perfectly comfortable standing alone if regulators don’t approve it. Josh — This is a decent risk-reward for a trade. We’re risking five points to see if this breakout sticks. There’s the potential for merger-related news to impact price so we just want to be aware of that context. Union Pacific pulled back to its rising 200-day moving average during the Liberation Day selloff and bounced almost to the day. It was a textbook reaction off a major support level, and buyers wasted no time. The stock reclaimed its 50-day, consolidated, and broke out above $260 last week. It is now retesting that level as support. A hold here sets up the next leg higher. RSI at 53 is neutral and doesn’t add much to the conversation either way. Momentum is neither extended nor washed out, which is actually fine at the early stage of a breakout retest. The $260 breakout level is now the line traders need to respect. A close back below it would be a reason to step aside and wait. Investors can use $250 as their stop, which roughly corresponds to where the 50-day is currently running and where the stock based before the breakout began. XPO, Inc. (XPO): Sean — XPO is a bit different than the rail companies we’ve discussed. XPO is a less-than-truckload carrier. They pick up smaller shipments from multiple customers, consolidate them into a shared truck and deliver them as efficiently as possible. XPO has been optimizing with AI — they began using AI-powered route optimization tools which were rolled out to half of the fleet and the company reported a 4% productivity improvement for Q1 2026. Volumes were up 3%, revenue rose 7% and operating margins hit 20% up 200 basis points year over year. Management reiterated their goal of full year margin improvement, 6%-8% annual revenue growth, and a continued focus on efficiency. Josh — XPO needs to marinate a bit. I want to see a few more weeks holding above and around $200 and some horizontal price action before I’d risk an entry. The stock launched nearly 40% in a matter of weeks early in the year, fueled by a strong ISM manufacturing report and a beat-and-raise Q4 earnings print, then spent the next several months giving back a good chunk of those gains. It is now sitting just above $200, which needs to hold as support, and the stock needs to build a proper base here before this setup becomes actionable. A period of quiet, sideways consolidation above $200 is what this chart requires before risking capital. The 50-day at $204 is close enough to current price that it offers little margin for error as a stop. Use $200 as the line. A close below it means the consolidation is failing and the stock needs more time. Patient investors can watch this one from the sideline and revisit when the base looks more established. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. 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