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.

Readers of this space know that one of the preferred sectors is the railroad sector. Time was -- just a short time ago -- the railroads were the darlings of Wall Street. Extraordinary demand for commodities from emerging markets and strong international trade increased demand for rail transport.

But then came the winds of September/October 2008: a financial crisis and the ensuing global recession stopped both commodity demand and trade nearly cold, and Wall Street soon soured on the railroads, including CSX Corporation (NYSE: CSX). In the panic and fear that occurred, the Street drove CSX's shares down to about $20 per share from over $70 in less than eight months. Talk about irrational behavior.

Not all values are within the U.S. Some values reside primarily outside the nation -- including Canadian Pacific Railway (NYSE: CP).

In general, analysts see F2009 carloads declining, netting a 0-5% revenue loss. That said, analysts also see an increase in potash shipments; meanwhile, the auto, intermodal, and coal export businesses will continue to struggle this year.

The rails -- once one of the chicest sectors in Wall Street circles -- were unceremoniously dumped by a financial crisis and an ensuing global recession that stopped both commodity demand and trade nearly cold.

Did Wall Street overdo it? Indeed they did, but the net result of that undiplomatic break-up is that certain railroads are offering bargains for investors who can tolerate moderate risk, and Norfolk Southern (NYSE: NSC) is one.

CSX (NYSE: CSX), a railway company whose colleagues include Burlington Northern Santa Fe (NYSE: BNI), Norfolk Southern Corp. (NYSE: NSC) and Union Pacific Corp. (NYSE: UNP), issued its Q1 report on Tuesday after the bell. As one might imagine, there was a drop in both sales and net income. The top line declined by 17%. The bottom line, on an adjusted basis (taking into account an item from last year's similar quarter), dropped 23% to $0.62 per share.

The economy is still taking its toll, obviously. Volumes were down during the quarter. However, the market sometimes cares about only one thing: beating expectations. CSX actually beat the analyst expectations of $0.51 per share. This significant difference led traders to push shares of CSX higher by 6.5% during Tuesday's after-hours session.

From the sound of selected analysts' research, you'd think that the U.S. economy would never recover. To be sure, there's much work ahead, particularly on the toxic asset removal and credit market fronts, but if you think the U.S. stock market's steady rise in March is a sign that financial institutions are starting to position themselves ahead of the typical investor, you're correct. And with the aforementioned in mind, Union Pacific (NYSE: UNP) is worth an evaluation.

Union Pacific is the leading rail freight carrier in the United States, transporting coal, chemicals, industrial products and freight over an enormous track network: 32,000 miles of route track in 23 states in the western U.S.

This post is part of a series featuring bargain stocks that are worth a look now. See more Cheap Stocks.

Maybe a railroad stock doesn't exactly seem like the cutting edge in investments. In fact, it might even strike you as old-timey. Fair enough -- but if you check out the year-to-date performance of Burlington Northern Santa Fe (NYSE: BNI), it's hard not to be impressed. At the end of November, the stock was down just 8% for 2008, compared to a loss of 40% for the broader S&P 500 Index (SPX).

The Texas-based freight firm transports everything from lumber and coal products to canned goods and oats. While you may have a perception of trains as pollution-spewing dinosaurs, BNI happily defies those stereotypes. Not only is the company adding new rail lines, it has also recently won accolades for its environmentally friendly practices. (Environmentally friendly for a railroad, of course -- I won't kid you by saying these locomotives run on rainbows and happy thoughts.)

On the fundamental front, BNI reported third-quarter earnings in late October that crushed analysts' expectations, and offered a rosy forecast for the fourth quarter. CEO Matt Rose said he's optimistic about his company's future, despite macroeconomic uncertainty. A pullback in corporate spending could actually benefit BNI, says Rose, because it's cheaper to transport goods by rail than by truck. "As the economy slows down, customers are going to be paying a lot more attention to cost," noted the chief executive.

Given the smorgasbord of economic demands and concerns -- domestic and foreign -- likely to face the new U.S. president, investors (and taxpayers) can justifiably ask 'Where's all the money going to come from to pay for these programs?'

Legitimate question, but one, for now, we'll let the political process sort out. (Current Gallup Daily Tracking Poll as of August 6, 2008, for the U.S. presidential election: Obama, 46%, McCain, 44%.)

Electing U.S. Sen. Barack Obama, D-Illinois, or U.S. Sen. John McCain, R-Arizona, will produce different programs and revenue priorities, due to the parties' different sources of power, but the argument forwarded here is that -- regardless of who becomes the new president -- the office holder should address transportation in a comprehensive way. Here are the major concern areas:

• Mass transit: We're early into the $4 gas era, of course, but initial U.S. Department of Transportation data indicates Americans are driving less and using mass transit more. The trouble is, many mass transit systems (rail, commuter rail, subway, bus) need to be expanded/upgraded to handle the increased ridership. Bigger, better mass transit systems will save the United States hundreds of billions of dollars in oil costs, not to mention the environmental benefits.

In a challenging market amid an uncertain U.S. economic landscape, identifying long-term, promising investment opportunities becomes a difficult task. Further, to make the investment equation even more challenging, there's election risk, as well, with the 2008 U.S. Presidential election five months away.

Still, risk-adjusted investment opportunities exist. Accordingly, here's a 'Fab Five' that should rank with the best the equity markets have to offer, 3-5 years out.

(Note: Don't buy these stocks if you're interested in a short-term trade of six months or less. These are longer-term investments where the goal is a double-digit, average, annual, total return on equity over 3-5 years.)

Potash (NYSE: POT). Current Price: $212, p/e 47. Revised Stop Loss: $170. Potash remains the best of a very good fertilizer bunch, due to its 20% global market share in the namesake fertilizer. Consider buying POT on a pull-back to $202-203, but keep in mind Potash may not retreat to that level.

Mosaic (NYSE: MOS). Current Price: $132, p/e 40. Revised Stop Loss: $97. Mosaic also is well-positioned in phosphate and crop nutrients. Further, the fact that 66% of its revenue is internationally based is especially appealing, given the U.S. economic slowdown.

Transocean (NYSE: RIG). Current Price: $144, p/e 10. Revised Stop Loss: $110. RIG offers deepwater oil drilling services in all regions of the world, and it's an oil-thirsty world.

Freeport-McMoRan (NYSE: FCX). Current Price: $114, p/e 14. Revised Stop Loss: $69. Copper / gold / molybdenum miner Freeport is one of a handful of companies that have the economies of scale to compete in the global mining sector of the early 21st century, and it boasts impressive clients, to boot. Consider buying FCX on a pull-back to $111-113, but keep in mind Freeport may not retreat to that level.

CSX Corp. (NYSE: CSX). Current Price: $66, p/e 23. Revised Stop Loss: $48. Ride the railroad resurgence with this superior trade / commodity / freight transport company. The rails are in the transportation sweet spot: truck transport costs are rising with fuel costs, and the U.S. highway system is inadequate, with increased congestion likely, pending future investment.

Top Pick: Potash.

Safest Pick: CSX Corp.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

Readers of this space know that one of the preferred sectors is the railroad sector. The once near-rust-belt level sector has experienced a revival at the start of the globalization age, and compelling economic trends document the commerce-based underpinnings of this revival.

Most transportation officials agree that the U.S. transportation infrastructure -- highways, roads, bridges, mass transit systems -- is in need of a major upgrade in order to meet the nation's vehicle transportation needs of the 21st century.

The nation's public officials will begin to address the above concern in the years ahead, as public funds become available, but until they do, and due to crude oil's sustained high price, an opportunity has emerged for another transportation form: you guessed it, the railroads. And Norfolk Southern (NYSE: NSC) is a railroad worth an evaluation.

Norfolk Southern provides rail transportation in the eastern United States, operating a 21,000-mile rail network in the eastern United States and Canada. It's an elaborate intermodal and coal service network that also has a large freight business.

When a major, metropolitan U.S. newspaper discovers a investment trend or a hot sector, count on increased share demand for companies in the sector. When that paper is one of the top three dailies, in this case The Washington Post, count on even more demand.

On Monday, The Washington Post examined the resurgence of the United States' railroad sector, touching on many of the themes discussed here during the past six months, and described why the rails' services are likely to be in demand for many years.

As Congressional Democrats and Bush Administration officials evaluate additional legislative ideas aimed at further stimulating the anemic U.S. economy, one proposal that could gain more traction in the months ahead concerns domestic infrastructure.

The consensus among economists is that the first economic stimulus package will provide only a modest boost (at best) to the U.S. economy, economist David H. Wang told BloggingStocks Tuesday. Further, if many Americans choose to save or invest their $300-$1200 tax rebate, instead of spending it or using it to pay down debt, the stimulus effect will be even less than projected.

That would leave the U.S. economy with a correcting housing sector, record-high oil prices (oil topped $113 per barrel Wednesday), a contracting job sector, an investment banking sector largely seeking to rebuild balance sheets and not lend money, and rising living costs weighing on consumer spending. In other words, Wang said, all of the classic U.S. growth engines, except exports, are likely to serve as contractionary forces through at least the first half of 2008, and most likely for considerably longer.

For nearly 30 years, the rails, long neglected in the United States, were considered passé. Then the globalization era dawned, with its exports and demand for commodities. Add a price of oil that's basically risen for 10 years and the results is: the rails are back. And with the above in mind, Burlington Northern (NYSE: BNI) is worth an evaluation.

With 32,000 miles of track in the western U.S. and two Canadian provinces, Burlington Northern accounts for about 45% of the west's traffic and about 23% of U.S. rail traffic.

Analysts see 2008 revenue growth of about 6-8%, down from double-digit growth a year earlier, but still healthy. Margins should remain solid, with modest pricing power. The Reuters F2008/F2009 EPS consensus estimates for BNI are $5.92/$6.81.

Even better: like the three other major U.S. railroads, BNI is in a relative sweet spot until the United States determines its energy policy for the 21st century. Or should one say 'if the United States determines its energy policy for the 21st century.' Investors will carefully note that the value Wall Street attaches to rail stocks pretty much mirrors the price of oil's ascent, due to the higher truck transportation costs implied by a higher price of oil.

Readers of this space know that the railroad sector is one of the preferred sectors. After decades of unconscionable neglect, U.S. railroads are experiencing a resurgence, propelled by international trade and the rail's cost advantage over truck transport. But as one knows, trains don't always roll, sometimes they have to brake to stop, and that's where Westinghouse Air Brake Technology makes its money.

Westinghouse Air Brake Technologies (NYSE: WAB), known as Wabtec, manufactures braking equipment and other parts for locomotives, freight cars, and passenger rail cars.

Products of Wabtec's freight group include air brake systems, draft gears, hand brakes, slack adjusters, heat exchanges, railroad electronics, and monitoring and control equipment. The company also builds new locomotives up to 4,000 horsepower and provides aftermarket services, including locomotive and freight car fleet maintenance.

Analysts expect strong, double-digit revenue growth on solid back-orders and new business. Analysts also like Wabtec's blue-chip clientele, decent pricing power, demonstrated ability to deliver products and services on time, and reasonable cost structure. The Reuters F2008/F2009 EPS consensus estimates for WAB are $2.53/$2.81.

Railroad giant Norfolk Southern Corporation (NYSE: NSC) was up 10% in just the last week, based in large measure on super 4Q and FY2007 earnings released a week ago, January 22. Fourth quarter operating revenue increased 6% to $2.5 billion, and net income increased 4% to $399 million. What makes these numbers even more impressive is that Norfolk Southern posted revenue increases at the same time it faced significantly higher fuel costs and a measurable reduction in shipments by volume. Coal shipments dropped 2% by volume, while general merchandise shipments dropped a hefty 10% by volume.

The story is the same for FY2007 results. Revenue increased while shipments by volume decreased. And the railroad still made money. The stock closed at $45.07 on January 21, but closed at $52.00 on January 28. Very nice capital appreciation for a week. The company increased its dividend payout by 12% to $0.29 per share, a 32% increase over the last year, and the 102nd consecutive quarter of dividend payout. Clearly, Norfolk Southern is a stock for the very long haul.