(This is “The Best Stocks in the Market,” brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Transportation stocks have had a wild year so far. Between the “Emancipation Day” tariff threat and this spring’s anomaly that turned the Dow Jones Industrial Average into an entertainment mirror, there has been “never a dull moment.” That said, the sector is up 43% over the past 12 months, compared to the S&P 500’s gain of 29%. But the chart has a serious asterisk due to the anomaly I mentioned…the index spiked to nearly 24,000 in late April, then collapsed just as quickly, but had nothing to do with freight demand or rail traffic. Avis Budget Group, a constituent of DJT, fell from about $100 to nearly $850 in a few weeks after two hedge funds cornered the stock’s free float, triggering one of the most unusual short squeezes in recent memory. Then, as the company indicated it would issue diluted stock, the stock price plummeted more than 70% in two days, and the index fell again along with it. With the exception of Avis Circus, fundamental sectors have legitimately performed well during the same period, with JB Hunt, Old Dominion, Ryder, and Landstar all posting double-digit gains in actual fundamentals. The sector was sold off heavily on “Liberation Day” in early April 2025, but recovered quickly and several stocks are now breaking out or preparing to break out. This week’s stocks reflect that theme. Sean covers the best stocks with high-level market statistics and then tells some stories about CSX, NSC, UNP, and XPO. enjoy! As of May 26, there are 183 names on “The Best Stocks in the Market” list. Top Sector Rankings: Top Industries: Top 5 Best Stocks by Relative Strength: Sectors to Watch: Transportation CSX Corp. (CSX): Sean — I wrote about CSX just before Christmas last year, and its stocks keep us happy all year long (sorry). I wrote about CSX on December 22nd. Josh had this to say about the technical: “Okay, let’s go with CSX. This is a buy now. CSX is in the midst of a textbook breakout and retest, with the stock rallying decisively before the former resistance in the $35-$36 zone is now acting as support,” he said. “I like this setup both in the long and short term,” he continued. “Traders can protect the $35.50 stop with potential downside risk. If you want to be more adventurous, you can drop to the Thanksgiving low of $33.50.” Since then, the company’s total return has increased 25%, putting it in the top 15 industries on the S&P 500 this year. CSX has seen a slowdown in sales since fiscal year 2022, but growth is finally starting to get higher. First quarter sales increased 2% year over year, operating income increased 20% and EPS increased 26%. This earnings growth was driven by margin expansion, with operating margin increasing 560 basis points to 36%. As sales volumes continue to steadily increase, CSX remains focused on costs. With more than 100 efficiency projects underway in the business, discipline appears to be paying off. Expenses were down 6% in the first quarter, and management raised full-year revenue growth to mid-single digits. There is a lot of transactional activity in the transport space, and CSX is also focused on that. After Union Pacific and Norfolk Southern announced their merger (more on that later), activist investor Ancora Holdings forced CSX to either hire advisors for a deal, find a merger, or replace its CEO. Now, CSX has a new CEO and a brand new partnership. Burlington Northern Santa Fe (BNSF) announced a coast-to-coast partnership with CSX, essentially recreating a merger without a merger. As you can see below, investors seem to like what they see. Josh — When we covered CSX in this column in December, the stock was trading at $36 in the midst of a textbook breakout and retest. The setup has been delivered. Since then, CSX has risen nearly 30%, hitting an all-time high of just under $47 earlier this month before returning to its current stock price level. Throughout this entire move, long-term investors continued to hold on to the stock as the price never came close to testing the rising 200-day moving average and has now fallen to $38. The next step is simple. If the volume rises cleanly above $46 to $47, the all-time high will break out and the sky will open up. The RSI is currently at 57, which looks fine on its own, but the trend line in that pane is worth noting. Since February, the RSI has been lowering its highs, but prices continue to rise. Low treble is no good. This negative divergence is a yellow light rather than a stop sign, but it does indicate that a limit has been reached and momentum is slowing down. In a perfect world, the RSI would start rising, confirming that prices are heading back. But we don’t have the luxury of just trading in a perfect world. Traders who took advantage of the December setup have earned the right to tighten the stops. The natural line is $42.92 for the 50th. A close below that after a run like this would be meaningful and worth respecting. Investors with longer time horizons can give more room up to $40, but the $42-$43 zone is where the nature of this chart changes. The theory accelerates above $47. Until then, be patient. If I were trading the stock (currently no position), I would take a half position here and double on the $47 breakout. Norfolk Southern Corporation (NSC): Sean — Norfolk is another major railroad company with approximately 19,500 miles of track in the eastern United States, primarily transporting industrial and agricultural products. NSC is in the midst of a merger with Union Pacific, which will create a large railroad operator with tracks across the country. A regulatory decision is expected in summer 2027. According to the latest proposal, the integrated railway would have a 39% market share in rail freight. Under the terms, NSC will be acquired by Union Pacific for an implied value of $320, including 72% UNP stock and 28% cash. Although NSC’s sales and margins were relatively flat, management expects volumes and margins to improve in the future, led by chemicals, energy, and intermodal (shipping containers). Josh — In this column, we don’t buy stock or arbitrage during mergers. The stock price was $314, and a takeover offer of $320 was accepted. You don’t need those 6 points. Next! Union Pacific Corp. (UNP): Sean — Next, contact the acquirer. Currently, UNP is the largest railroad in North America by track miles, operating 23,000 miles of track across 23 Western states. UNP transports approximately 30 billion pounds of cargo each week, including agricultural products, industrial parts, and high-end finished goods. During the first quarter, UNP reached several operational milestones. Freight vehicles moved 9% faster, terminal dwell time (the amount of time a rail car sits without being pulled) improved by 11%, and fuel efficiency reached a new record. This translates to 40 cents of every dollar of revenue converted into operating income, increasing adjusted EPS by 9% year-over-year. If the NSC acquisition is approved in 2027, the merger would create the first transcontinental railroad in the United States, combining NSC’s Eastern Railroad and UNP’s Western Railroad. The combined company will generate approximately $36.4 billion in revenue and $18 billion in EBITDA and control approximately 40% of U.S. rail freight, comparable in size to Berkshire Hathaway’s prized asset, BNSF. The transaction is expected to generate additional EBITDA synergies of $2 billion, including $1 billion in operational and technical cost savings. In terms of volume, Unified Rail aims to add 1.4 million intermodal trips and more than 400,000 vehicle trips per year, while converting 10,000 interrails (where customers currently have to accommodate connections between railroads) to seamless single-track service. UNP CEO Jim Vena has made it clear that the deal will only go through if it’s positive for shareholders, and that the company has no qualms about remaining on its own unless regulators approve it. Josh — This is a decent risk reward for the trade. We are betting 5 points to see if this breakout sticks. Be aware of merger-related news as it can affect prices. Union Pacific rebounded almost to the day, returning to the 200-day moving average that had risen during the Emancipation Day selloff. This is a typical reaction from a major support level and buyers wasted no time. The stock regained its 50-day value last week, consolidating above $260. We are currently retesting that level as support. Holding here will set the next leg higher. RSI, 53, is neutral and doesn’t contribute much to the conversation either way. Momentum doesn’t grow or wash out, which is actually fine in the early stages of a breakout retest. The $260 breakout level is currently a line that traders need to respect. Once you get back under it, you’ll have a reason to step aside and wait. Investors can use $250 as a stop. This roughly corresponds to where the 50-day run is now and where the stock was based before the breakout began. XPO, Inc. (XPO): Sean — XPO is a little different than the railroad companies we’ve been discussing. XPO is a sub-truckload carrier. Receive small shipments from multiple customers, consolidate them onto shared trucks, and deliver them as efficiently as possible. XPO has been advancing optimization using AI. The company began using an AI-powered route optimization tool, which was deployed to half of its fleet and reported a 4% increase in productivity in the first quarter of 2026. Volume increased 3%, revenue increased 7%, and operating margin increased 200 basis points year over year to 20%. Management reiterated its goal of improving full-year margins, 6% to 8% annual sales growth, and a continued focus on efficiency. Josh — XPO needs to marinate a bit. I would like to see it stay around $200 for a few more weeks and see a horizontal price movement before taking a risk and entering. Buoyed by a strong ISM manufacturing report and beat-and-raise fourth-quarter results, the stock rose nearly 40% in the first few weeks of the year, before giving back a significant portion of that gain over the next several months. Currently sitting just above $200, this should hold as support, and the stock needs to establish a proper foundation here before this setup becomes viable. We need a period of quiet sideways consolidation above $200 before this chart puts capital at risk. The 50-day price of $204 is close enough to the current price that there is little room for error as a stop. Use $200 as your line. A closing price below this means the consolidation has failed and the stock needs more time. Patient investors can watch this issue on the sidelines and revisit it once the fundamentals appear more established. Disclosure: (none) All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The content is general in nature and does not reflect your unique personal circumstances. 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