CSX Pressured By Hedge Funds

They seem to think there is quite a bit of unlockable potential in railroad company CSX. I have seen more and more analysts start to push railroads recently.

TCI Fund Management LLP and 3G Capital Partners Ltd. say CSX, the third-largest U.S. railroad, can double earnings before interest and taxes in five years if it boosts prices further and reduces spending. Jacksonville, Florida-based CSX has already pushed up rates and added $3.4 billion to a share-repurchase program since TCI began its campaign in May 2007.

So we have two hedge funds trying to do a proxy fight to add 5 board members while these other hedge funds are waiting to profit from the move.

Tiger was the biggest CSX buyer in the first quarter, amassing a 2.1 percent stake. It was followed by TPG-Axon, which more than doubled holdings to 2.4 percent, and Chase Investment Counsel, a firm overseeing about $7 billion that bought 3.47 million shares, or almost 1 percent. Tiger founder Chase Coleman and TPG-Axon Chief Executive Officer Dinakar Singh didn't return calls seeking comment.

If there was a better credit situation I would bet one of these funds would probably try to take a company like CSX private. Now they engage in proxy fights so that they can unlock the supposed value. Hmm, I think CSX may be an interesting opportunity going forward. I just don't like how these hedge funds want CSX to load up on debt in order to do stock buybacks. It just doesn't seem like a good idea when we know that the economy is slowing.