Canadian National R.R. (CNR.TO)

Getting hit because of a perception they may get hit on the “crude by rail” in terms of volumes. There is an entire peripheral damage type discussion that is starting to spook the entire street that is looking for whatever exposure anything might have to a low oil price. This and Canadian Pacific (CP-T) have benefited over the last 5 years in the ramp up in oil transported by crude, as well as sand for fracing transported by rail. The reality is that it is less than 5% of their business. Valuations on railways have come up, but people have made a lot of money on the stocks and are getting a little jittery and are starting to pull the trigger now. This could be due for a 10% pullback; these are great, long term businesses.

Both Canadian National (CNR-T) and Canadian Pacific (CP-T) are very expensive. The stocks, in terms of valuation, have not been higher. Thinks they do come back. Trading at EBV +5 in terms of valuation. You are in the bottom of the 9^th inning with these 2 companies. Too overpriced.

The period of seasonal strength for transportation stocks comes to an end right now. This doesn’t necessarily mean it is going to go down. CNR is still an industrial stock, which does well all the way through to May, but it doesn’t see the relative performance that you want to see compared to the broad market. He would tend to shy away from this and go to something like the SPDR Industrial ETF (XLI-N).

This has been an amazing generator of free cash to shareholders. Operating ratio is 58%, which he can see staying at current levels. They have a great commitment of returning capital to shareholders. They are talking about double-digit growth next year. A wonderful, wonderful business that benefits from low oil prices. Not a bad entry point.

Rails have taken a bit of a hit lately. Crude by rail would have impacted the stock. The Canadian rails were getting awfully, awfully expensive. Have recovered somewhat in the last couple of days. He prefers CSX (CSX-N), which is cheaper by a fair bit and has a different exposure with quite a bit less oil. If you think oil stays down, it would probably be the best. However, if you think energy is going to recover, he would probably buy this one.

Crude by rail and all the ancillary stuff related to oil have had an impact. This is one you could wait for as he doesn’t think there will be a quick resumption on the upside. Doesn’t feel oil is going to change the dynamic in the next week or 2.

The Company expects their crude by rail traffic to stay strong. Given the upfront investment made by their customers, they see crude by rail as a viable long-term growth business. Most of their growth is coming from heavy producers, which are a little bit more insulated. Management is forecasting that the Keystone will go through and is included in their assumptions, so this is not seen as a big threat. Probably the bigger risk is if the macro were too slow or Europe to fall apart.

CNR-T is the best performing rail in terms of operating efficiency in North America. Buy a half weight and buy the balance in half a year.

Canadian National (CNR-T) or Canadian Pacific (CP-T)? Canadian railroads have done very well. This one has had a historic advantage because of the nature and the structure of their tracks. He prefers CSX Corp (CXS-N), which is trading at about a 20% discount to its Canadian competitors. He would look to some of the US rails instead.

Has been adding to his Union Pacific (UNP-N) position in the US. It is clear that with a near impossibility to get any pipeline projects of national scale approved, a lot more oil is going to continue to go on rail. This company along with Canadian Pacific (CP-T) will benefit, as they will from commodity movements.

The rail space has performed well, a good cheap way to play North American transportation and economic growth. Has not performed as well as CP has, but it has performed well over the last few years. You can’t complain too much about the chart.

Thinks this should be a part of everybody's portfolio. One of the best in class operators with precision railway logistics. Looks like it has a lot of headwinds, including the coal business. Also, have a hefty pension liability that they are facing. There is no reason not to continue owning this in the future.

Likes both Canadian National (CNR-T) and Canadian Pacific (CP-T), but prefers CP a little better. Feels the growth metrics for it are a little bit stronger and valuations are a little cheaper when looking at a PEG ratio analysis. Given the fact that they have both sold off quite a bit, especially this one, he would be a buyer. These are good entry points.

This company should benefit from lower oil prices, but it is very sensitive to the economy. Doesn’t know if it is super cheap now. At some point it might become an amazing Buy. Railroads are good businesses because they are difficult to replicate. We are seeing some M&A activity in the railroads right now, which also could help.

Rails are trading substantially above where they usually trade. Feels this stock will come back to $62.46. The model price is $77.87. Irrespective, this has to come back to their structural line of $62.46.