If rail freight numbers are a good economic indicator, and in my experience they are, then the railroads are sending a very strong message right now. That message, in it's simplest form, says that our national economy is rebounding nicely from last year's low ebb, but we've not yet moved into what could be termed a substantial recovery.

The Association of American Railroads (AAR) latest traffic report paints a fairly bright, yet cautious, picture. Carload freight volume is above 2009 levels for the sixth straight week over last year, and intermodal freight volume (shipping containers and semi trailers loaded on train cars) is above 2009 levels for the twelfth straight week. Total freight volume for the week ending April 3, 2010 was estimated at 31.3 billion ton-miles. This represents an 11% increase over the same week in 2009, but still represents a decrease of 9.3% when compared to the same week in 2008.

As always, there is a volume of speculation after the much anticipated release of the quarterly changes in holdings report from Berkshire Hathaway (BRK.A). While leaving all the deep analytical number crunching for greater minds than my own, I'd like to take a look at what Warren Buffett could be telling us through his company's latest form 13F.

Why has Warren Buffett swallowed Burlington Northern Santa Fe (BNI) while letting go of Norfolk Southern (NSC) and Union Pacific (UNP)? Being the master of due diligence, Mr. Buffett has most likely determined that BNI is the most attractive of the three. The future of rail transport is all but guaranteed to shine, and I believe that Mr. Buffett has exited the other two rail companies simply to avoid conflict of interest issues.

If there ever was a stock that was hiding in plain sight, it is that of Berkshire Hathaway (BRK.B) which is capitalized at a tad over $150 billion and run by "my pal Warren" and his pal Charlie. That's Warren Buffett and Charlie Munger, perhaps the most successful investors in five generations.

Berkshire Hathaway, a textile mill, was Buffett's first turn-around play. He was successful and started generating significant amounts of free cash-flow that allowed him to invest in other things. Those investments also paid off and eventually the original enterprise became the namesake of today's diversified giant holding company.

I selected BRK.B for numerous reasons and believe it will easily beat the market next year as has been it's history.

Analyst Upgrades

• Kaufman Bros. upgraded Yahoo! (YHOO) to buy from hold after channel checks indicated display advertising is seeing continued improvement in pricing and demand. The firm finds the risk/reward profile on Yahoo! shares attractive at current levels and raised its price target on the stock to $20 from $19.
• Citigroup upgraded Edwards Lifesciences (EW) to buy from hold following the company's investor meeting as it believes new product launches will serve as catalysts in 2010. Citi raised its target on shares to $101 from $72.
• Deutsche Bank upgraded BWAY Holding (BWY) to buy from hold following the company's Q4 results and raised its target on shares to $22 from $17.
• Clearwire (CLWR) was upgraded to buy from sell at Soleil.
• Nokia (NOK) was raised to hold from sell at Societe Generale.
• NCR Corp. (NCR) was upgraded at JPMorgan to overweight from neutral.

The clock is ticking away the time before the year ends and I have only begun to sort out the possibilities. In Part 1 of this series, I discussed breaking up my potential picks into three categories: contender, on the fence, and out of the running until the 10 stocks have been identified.

Four contenders have been considered so far: American Eagle Outfitters (AEO), Anadarko Petroleum (APC), Anglo American ADR (AAUKY) and Diageo plc (DEO).

Six more are included in today's review: EZCorp Inc. (EZPW), General Electric Company (GE), Wells Fargo & Company (WFC), Annaly Capital Management ( NLY), Intuitive Surgical Inc (ISRG) plus Berkshire Hathaway (BRK.B). These include the remaining five from 2009 and one more familiar to most investors.

TheStreet.com's Jim Cramer says at least one country is getting it right when it comes to economic stimulus.

How in the heck can you get 16% industrial growth and lower-than-expected consumer price inflation? How is that possible? Yet that's what we saw from China last night, and that's a tonic to pretty much everyone who is waiting for our own stimulus to kick in.

And we need it.

On Monday, Fluor (FLR) (Cramer's Take), the giant construction company, when asked if it could quantify the value of stimulus dollars currently in backlog, said "Really, the only stimulus funding we have seen directly has been the award that we got at Savannah River for some nuclear soil remediation. And, it was, I would say, we're less than $0.5 billion."

Warrent Buffett, investor extraordinaire, just bought something. The Burlington Northern Santa Fe Railroad Company (BNI). It cost $26 billion. He already owned part of the railroad, but he wanted it all. Figured it was a great investment. So why should you care?

First, because it's Warren Buffett. While he's made one or two bad investments (see Eastern Airlines (who?) as an example), most of what Mr. Buffett buys increases in value. He's not the second richest man in America because he's lucky. When he buys into an industry, it may be one that most investors should consider.

Warren Buffett's (NYSE: BRK.A) decision to buy the 77.4% shares of Burlington Northern Santa Fe (NYSE: BNI) that he did not already own, for $100 each in cash and stock, is like an early holiday present for BNI shareholders.

And first recommended on April 30, 2009 at a price of $67.81, that means BNI shareholders will earn a cool 47% for their April-bought shares. Not bad for a six-month investment. I would say BNI probably was worth 10-15% more, but BNI shareholders will take the immediate pay-off, just the same.

Buffett's move also reflects his stance toward U.S. railroads, a sector I like, too.

Yesterday it was announced very loudly that "my pal Warren" was going to acquire the 77.4% of the Burlington Northern Santa Fe (NYSE: BNI) railroad, that Berkshire Hathaway (BRK.A) does not already own, for $100 per share, offering about a $24 premium to Mondays closing price.

Talk about putting your money where your mouth is -- yikes! Buffett has gone all in, betting the economy is healing, and silencing anyone that questioned his integrity or motives for cautious optimism saying it was all talk!

U.S. stock futures climbed on Wednesday morning, ahead of the decision by the Federal Reserve on interest-rate and monetary policy. This afternoon, the Fed will give its outlook on the economy and the corresponding policy it's taking. It is widely believed the Fed will not raise rates. Meanwhile, more earnings and economic data are on tap.

Unlike this morning, traders appeared more cautious Tuesday, as the Fed began its two-day policy meeting. Stocks ended mixed and fairly unchanged following news that Warren Buffett's Berkshire Hathaway (NYSE: BRK.B) has decided to buy Burlington Northern Santa Fe (NYSE: BNI) in a deal worth $44 billion and as Johnson & Johnson (NYSE: JNJ) announced a 6-7% workforce reduction.

A major acquisition is coming to light this morning, as Berkshire Hathaway (NYSE: BRK.A, BRK.B) has announced that it is acquiring Burlington Northern Santa Fe (NYSE: BNI). The deal calls for BRK to dish out $100 per share in cash and stock for the 77.4% of BNI shares that BRK doesn't already own. The deal will cost BRK $44 billion.

The acquisition gives us a glimpse into the mind of the Oracle of Omaha, BRK's CEO Warren Buffett. He feels that the "country's future prosperity depends on it having an efficient and well-maintained rail system." Buffett is betting that railroads are going to do well, which would stem from prosperity in the American economy.

Berkshire Hathaway (NYSE: BRK.A) announced the acquisition of Burlington Northern (NYSE: BNI) for $100 per share in cash and stock for a deal worth $34 billion. BRK.A is purchasing the remaining 77.4% of outstanding BNI stock its does not own. BNI November option implied volatility is flat at 36, December is at 35; verses its 26-week average of 37 according to Track Data, suggesting non-directional price fluctuations.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

CSX (NYSE: CSX), a railway entity similar to companies such as Burlington Northern Santa Fe Corp. (NYSE: BNI), Norfolk Southern Corp. (NYSE: NSC), and Union Pacific Corp. (NYSE: UNP), saw a nice bid during Tuesday's after-hours session. The market enjoyed CSX's Q3 earnings report so much it sent shares of the company higher by 2.6%.

What was so good about the data? According to TheStreet.com, CSX made 74 cents per share from continuing operations. The analyst community was counting on 71 cents per share. Perhaps more importantly, management seemed pretty upbeat on the state of the economy. Like a lot of other pundits, CEO Michael Ward thinks that the recession will eventually start to wane, and that we may have already experienced the bottom of the cycle.

"We rate both Burlington Northern Santa Fe (NYSE: BNI) and Canada's CN Rail (NYSE: CNI) as buys," says analyst Tom Slee.

The contributing editor to Gordon Pape's Internet Wealth Builder suggetss, "Burlington Northern remains my number one pick in the sector but CN is excellent value at these levels." Here's his bullish review.

"Burlington Northern Santa Fe had a relatively good second quarter, posting earnings of $1.18 a share. This is down from $1.34 in 2008 but beat the consensus estimate of $1.01.

"Year-over-year revenues fell 26% although this was offset by a 33% reduction in costs as a result of tighter controls and lower energy prices.

Rail carloadings for agriculture and coal are down, as is containerized trade traffic, and the near-term does not look bright, but you'd never know it from Burlington Northern Santa Fe's stock price trend.

Institutional investors have bid-up shares in anticipation of U.S./global recoveries. Therefore, I'm reiterating my Buy rating for Burlington Northern (NYSE: BNI), first recommended on April 30, 2009 at a price of $67.81. However, there is caveat: wait for a pull-back to about $75, and hope the market gives you the chance at a decent entry point.