During the summer of 2006, I reluctantly attended a lunch in Cleveland with the CFO of major U.S. railroad operator Burlington Northern Santa Fe.  Historically, railroads had been left out of discussions pertaining to growth stocks but that meeting went a long way towards changing my opinion.  There is a great article in today’s Wall Street Journal titled “New Era Dawns for Rail Building” (subscription required) that discusses this rejuvenation at length but here are the highlights.
For decades, the demand for the services offered by railroads declined.  As interstate highways were built, cars replaced passenger trains and trucks began handling the freight.  Things began to change in 2003 as a rebound in the US economy and imports from Asia created a surge in demand.  Mix in higher fuel costs (trains can move a load at one-third the cost of trucks), highway traffic congestion and shortages of drivers willing to be away from their families for the long-haul routes and the rails are regaining some of their luster.  To meet this growing demand, railroads are investing capital to upgrade and improve their infrastructures at a clip not seen since the turn of the century – the previous century.  
Investors are taking notice with Warren Buffett announcing an 18% stake in Burlington Northern late last year.  With an increasingly global economy, improved competitive position and continued upgrades to infrastructure, we could see growth on the rails for quite some time.

As active managers at Broadleaf, we have learned to set aside the notion that older industries won’t ever be growthy again.  Sometimes, old vines sprout new shoots.