Kansas City Southern's stock is headed north

Kansas City Southern has operations in the U.S. (56% of FY2008 revenue) and Mexico (44% of FY2008 revenue), including 6,000 miles of track.

Look for KSU's FY2010 revenue to increase 6-9%, and that's a major reason why institutional investors have looked past KSU's likely, double-digit revenue decline for FY2009.

Meanwhile, margins should continue to increase in the year ahead, as should system-wide efficiency. One substantial improvement: KSU is replacing older locomotives with new, more-fuel-efficient locomotives. The First Call FY2009/FY2010 EPS estimates for KSU are 55 cents to $1.08.

Technically, KSU's stock is due for a breather: shares have more than doubled since March. However, view any pull-back above $20 as a Buy opportunity: KSU's stock is headed north.

Stock Analysis: Kansas City Southern is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in KSU now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your KSU position before December 2009. Sell/stop loss if you were to buy shares in this company: $8.50.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.