Canadian National R.R. (CNR.TO)

This has been one of the great investments in Canadian history. It is a great name to own. The railroad industry is a monopoly, because we are not going to build new railroads anywhere in North America. The number of investable rails has shrunk. You can pick any one. He finds them a little pricey in the current market. Their multiples are typically less than the markets, and are trading at kind of a market multiple today.

The stock is very extended. The rails have had a great run. The problem is that it started at book value and is now at about 5.5 times book and it is not going to do that again. He is not knocking the company and the management, but the problem is that it is ‘in the market’ already. It is VERY expensive.

This just had a slight technical break out today. It went into an all-time high. It is a gorgeous chart. Trending higher. On a seasonal basis, this has a difficult time between now and coming into the fall. However, on any stock that is moving like this one, stick with it for now.

He likes this fundamentally. Looking at the rail charts of the major North American rails, they have all advanced in the last month or 2, discounting an economic recovery to the point that they are all at levels that make it uninteresting at this time. If you own it, continue to Hold.

(Top Pick Mar 22/16, Up 24%) The best run, most profitable railway in North American. He likes their structure better than CP-T. CNR-T is less commodity oriented and has a bigger US footprint. This has been a better grain season. This one continues to be his favourite.

He would avoid rails in general. The idea of import taxes, trade wars, etc. it is not really conducive to goods crossing borders. This one particularly, does a lot of business taking foreign freight along the West Coast, and into the US. He would worry about that freight suddenly going directly to the US, as opposed to through Canada.

Still thinks there is upside in the rails. The fact that they have improved their ROC for about 6 years in a row, from 5% up to 9%, and if it can edge a little higher, valuation is going to go up as well. Canadian Pacific (CP-T) might be a little stronger.

The trend is still firmly higher. It has been trading in a rising trend channel for the past 6 months, and there is no indication it is going to stop here. The major moving averages are all pointing higher. Transportation tends to do well from about the end of January all the way through to May, and that is attributed to the pickup in industrial production in the more cyclical areas of the economy. It looks ideal to pick up on any pullback or weakness down to its 20 or 50 day moving averages. He has the 20 day at about $92, which would be a more opportune time to pick it up.

This has had quite a run in the past year. Efficiency ratios are excellent and management is good. Pays a modest dividend. It is fully valued.

18 times earnings. You have a growing US economy and the Canadian economy is turning around. There are large barriers to entry. There are fewer competitors and those competitors are more rational. He thinks you will see some increases in pricing. It is a great place to be right now. It trades at a discount to US peers.

The best run and most profitable railroad in North America. As a long-term investor, he would continue to hold this. It will benefit from increasing economic growth in both Canada and the US. It is not as commodity related is Canadian Pacific (CP-T).

CSX-N was the cheapest one and now Hunter Harrison may be taking a run at it. CNR-T has a model price at $106.10 with a 17% upside still. He does not like to buy them except at EBV-5, around $72 in this case. All rails are very, very expensive here.

Canadian National (CNR-T) or Canadian Pacific (CP-T)? He likes both. Hunter Harrison leaving Canadian Pacific has somewhat neutralized it. On a valuation basis, you aren’t getting a bargain of one over the other. He would take a half position in both.

If there was one stock that he had to pick to hold forever to beat the TSX every year, it would probably be this one. A good area to be invested in.

The best rail in North America. Lowest operating ratio and generates a lot of free cash flow. Very customer focused. It continues having good growth. They don’t haul a lot of coal or oil, but incrementally that could be positive. He expects them to continue giving best class execution and continued dividend growth.