Canadian National R.R. (CNR.TO)

Don’t add money to rails right now. They have been a phenomenal story until now. There is a limit to how far you can take these based on valuation alone. He would take profits right now in CP-T and hold CNR-T.

Valuations are historically high. There is decent earnings growth as long as the economy keeps going. There is not enough earnings growth to blow you away or be higher if you look at a PEG ratio. Because of this, he owns CXS (CSX-N) in the US, which is trading at about 2/3 only of the valuation of CNR and Canadian Pacific (CP-T).

22 times earnings, 12% revenue growth rate for this year, which is higher than other railways. Prefers it to CP-T, but would not buy either right now.

Likes the industrial space and the rails. However he likes Canadian Pacific (CP-T) a bit more, which seems a little bit cheaper in terms of different valuations. However, they are both great.

He is still buying it for new accounts. The best managed and most profitable railway in North America. It also has less commodity exposure than CP-T and some of the US rails.

Stock is up quite nicely in the last month or so. There is no real reason he can see, other than the US economy is improving, probably faster than people had expected. This is a definite North American railway because they have rail going east, west and north, south, all the way to the Gulf Coast. They are participating in the growth of the US economy.

Very expensive. They seem to keep getting their numbers every quarter. As long as they continue to do that and the market stays the way it is, it will continue to go up, but you need to keep an eye on it. If there is some sort of correction here, a lot of people may take some short-term profit, but that would be an opportunity to pick up some shares. 1.3% dividend yield.

Stocks like this and Canadian Pacific (CP-T) and Tim Horton’s (THI-T) have done very well, reaching very, very high valuations in Price to Book terms. What they all have in common is that they have all decided that they want to buy back stocks. Realize that when you’ve got a stock that is trading at 5X its BV, which means that for every $1 of equity that you are taking out of the treasury to buy stock, you are buying $0.20 worth of equity to cancel. This means your ROE on investment is worth -80%. You are actually subtracting value, and the BV is going down. This means that when you have a market correction, the downside risks are increasing in those stocks. What they should do is issue stocks, raise the BV and use the money to expand their existing business. If you have no use for the money, then at least give the existing shareholders a dividend. In the short term, these things are working out quite well. If you own, the stock could run further, but be ready to Sell.

Made a good profit on the rails, but bailed out long before their latest profits. If he were comparing this with Canadian Pacific (CP-T) today on a valuation perspective, he would certainly own this one. It is a more profitable company with a lower operating ratio. A much bigger company in terms of revenues. Rails are currently trading at 20X earnings, and he would have to see a fairly significant correction of 25% or more, before he was interested.

Likes the rail space. Canadian Pacific (CP-T) looks a little bit cheaper on a growth to the PE metric. It makes a lot of sense to own these types of names.

Just reported in line with what was expected. The cheaper rails tend to be US because the 2 Canadian rails have done so well. He is currently in CSX Corp (CSX-N), which is at about a 5 multiple discount. This one has the best operation in North America.

He is bullish on rail companies. There has been a problem moving the volume of grain. Whenever you hear there is a problem with too many carloads, that has to be good for rail companies. They are moving more oil because pipelines are not being built very quickly. Prospects for Canadian rail companies are pretty good.

Would not buy it here. They will have a decent quarter. She would prefer to wait for a bit of a pullback. Near $65 is likely.

Right now, the rail sector is doing well. He can’t find a better combination of dividend growth, management expertise and management ability than in this company.

Would love to buy it back at $61, EBV+5. Model price is $78.17, 12% upside.