Canadian National R.R. (CNR.TO)

They had a surge in volume, but suffered terrible weather and couldn't meet demand. The new CEO will attack these problems with new and more trains and tracks. Meanwhile, other rails like CSX are catching up.

It's a solid industrial company that's seen a slight pullback. A good long-term hold, a play on the economy, particularly in the west to transport oil where there's tremendous demand (from a lack of pipelines).

Relatively cheap compared to its peers. Cost increases. He is modeling 9% earnings growth. You can write a put. The trend is good over a couple of years.

(A Past Top Pick on Aug. 30, 2017, Down 0.17%) It's rallied 10% off the lows. The market reacted well to last week's earnings with a strong balance sheet. During the conference call, the CEO addressed several investor concerns, including bottlenecks. Bad weather hasn't helped. It's his worst-performing stock of the past 12 months, but he'll hold on.

They have been struggling. It is a great franchise. Consolidation has been the story and this has been a great story since the early '90s. They are well run but we ran into problems with weather. We are not building a third rail line in Canada. The issue is valuation. They are trading at much higher multiples than they have. He is watching it. You could put it away for 20 years and not worry.

There is rational competitors and high barriers of entry. That is why he really likes the industry. Pricing power is important. The problem they have is they took on a lot of business in the last while and some of these customers are not happy. There are some issues there. One of the best networks around.

He would love to be a buyer near $85. The model is calling for 17% upside at current price levels. Current management instability may help push it down to his target buy level.

Earnings were just announced and are in line with expectations. They've have service problems--trains sitting in dockyards and moving slowly. Did they fire the CEO as a result? But this is an interesting opportunity now as the economy improves. He's looking at it. Expects 7-10% earnings growth compounded over the long term.

The rail sector is very, very cyclical. If industrials are doing well, then the rails should be doing well. He thinks 2019/20 is when the next recession hits and the rails will do badly then. He would avoid the rails a bit.

He has owned this for a long time. Because of the better infrastructure layout, he prefers them over CP. He just doubled their position recently, cognizant of the issues with the new management changes. The infrastructure cannot be replicated, but it still has to be run well.

It has gone through a lot of changes recently. They had a tough winter. They had capacity constraints. It is the cheapest it has been in years. He models 9% earnings per share growth. They can fix their issues. They should be trading at a premium. (Analysts’ target: $104.94).

What company do you prefer CN Rail (CNR-T) or TransCanada (TRP-T)? He likes both. Near term he likes a little more Transcanada (TRP-T) as it is an asset class that is in shortage now. CN Rail (CNR-T) took the cost cutting a little too far and is struggling a little but long term they are a great business.

CN (CNR-T) versus CP (CP-T). He would love to see CNR-T to pullback to $83 and has a model price of $120. He has a model price on CP-T of $261. There is more upside potential on CNR-T.

A core holding. Dividend grower, increasing 10% this year. It has had its challenges, but the good news is their volume growth exceeded expectations. They have congestion problems in the west and the U.S. They're spending a lot of money with 60 new locomotives and 300 more train crews. Will right itself in the second half of 2018. Earnings YOY may be flat, but should rise 10% next year. There's more to the story in the recent CEO change. Maybe he was an interim CEO all long. (Analysts' price target is $105.61.)

It went sideways in 2017. There was almost no reaction today to a change in the CEO. It is not an expensive stock right now. You could buy closer to the recent lows.