After learning that Warren Buffett, the value investor's equivalent of A-Rod, was putting his money into U.S. Railroad firm, Burlington Northern Santa Fe (NYSE: BNI), railroad stocks suddenly became trendy. Driven by increasing consumption for commodities and transportation services, railroads have been targets for value investors for a long time. Buffett's investment put the industry back on the investment map.

So, it wouldn't be surprising to see that hedge funds are playing the same hand. CSX Corp. (NYSE: CSX), a large integrated transportation company servicing everything from ports, trucks and rails, has been in the news lately as the target of an activist hedge fund based out of London, named the Children's Investment Fund.

The fund, started in 2003 by Chris Hohn, has been very active and successful in extracting shareholder value from a variety of situations. It forced the resignation of the Deutsche Borse CEO after he refused to abandon his plan to take over the London Stock Exchange.

It seems like the CIF hit a snag with CSX, though.

In response to the Fund's demands, CSX accepted none of them. In a great response sent by the CSX Board to TCI, management makes a strong case. You can read the letter here.