Canadian National R.R. (CNR.TO)

Really likes it, one of his larger positions. Bought more when it declined into the $120s. Being penalized by risk arbitrage and lots of debt. Not a lot of regulatory risk. KSU is a great way to connect Canada with the US. Will really have to sharpen their pencils to handle the debt.

Dynamics of the rail industry have always been good. High barriers to entry. Sustainable demand will lead to better pricing power, better margins, and free cashflow growth. With the KSU deal, would be one of the major players in NA. If the deal doesn't go through, stock may pop as CP's did. Yield is 1.86%. (Analysts’ price target is $145.75)

Exceptionally well run. Up until the last couple of years, a great secular growth story. The takeover of KSU will put a cap on the stock for the time being. Over the long haul, the absolute tonnage they've transported hasn't really increased. They've just become more efficient and raised prices. Stagnant profit growth. The KSU deal means a lot more debt, and a lot more shares outstanding. With valuations where they are, he'd take his money off the table.

21-22x earnings. Best rail network in NA, only to get better with KSU, especially tapping into auto plants. Well managed. Efficient, reliable. Cyclically advantaged, with a lot of freight moving. Strategically important asset and infrastructure.

Market outlook is somewhat cautious, and large cap Canadian is a good place to be if value outperforms growth. You have to pick your spots and this is it. Good pricing power, safety, cheap on the KSU headlines, critical infrastructure, somewhat defensive. Efficient in an ESG context. A win whether the deal goes through or not. Yield is 1.90%.

CNR will get the KSU. CNR has the growth to be stand alone. The deal is most likely accretive. Would buy this dip right now.

It's her preferred rail, which she likes, and has long owned this. The overhang in their proposed buy of Kansas City Southern, and this deal is still very early. KCS said they favour CN's bid over CP's. Now, CN is trading at a discount to its American peers, so you can begin nibbling here. Covid showed how vital the rails are to the economy, and no further rails will be built. Yes, CN will take on debt if they buy KCS, but long term this will benefit CN. If they don't get KCS, CN is still a good rail company.

CP is better suited to do the KSU deal than CN. Great things about rail are high barriers to entry, good pricing power, limited by rational competition, good volume growth means better margins and cashflow. Great industry to be in. KSU deal may take a long time, but will help the winner's bottom line. He owns CN.

CN vs. CP The transports are close to their highs as volumes are hitting historic highs. He can't choose one over the other until the Kansas City Southern deal is complete. Who will win? If you hold a position in either, just hold and wait. If you don't own at all, then maybe buy a small position in both. Then after the deal, trim the loser and increase the winner.

(A Top Pick May 01/20, Up 20%) He's pleased, not surprised by their growth. He bought this some years ago because the railroads were showing pricing power and leverage to a stronger economy and that's certainly happening now, post-Covid, as the economy grows rapidly. Their assets of 32,000 km of track network offer a long life. If the KC Southern deal passes, it will extend their network into Mexico's industrial heartland. This deal is pricey but the synergy would be massive. He likes the deal.

CP-T and CNR-T bid on KSU-N. The bidding war for KSU-N. CP-T and CNR-T are locked into a bidding war. CP-T shareholders want CP-T to push this a bit so they can get it. He does not think CNR-T shareholders are as much in favor of the bid. He does not have a horse in the race, but he thinks CP-T will raise their bid a little. CP-T would benefit more with this US exposure, but CNR-T might have more pure synergies. He is watching it play out from the sidelines.