Canadian National R.R. (CNR.TO)

Likes the rails a lot, especially this one. Had a very difficult last quarter because of weather issues. Had a bit of a pull back so now is a good time to buy.

Canadian Pacific (CP-T) versus Canadian National (CNR-T)? Just sold the last of his positions and would like to get back in when it gets back to the trend line in the low to mid $90’s. This would be his preference because it is less overvalued.

(A Top Pick June 11/12. Up 20.46%.) Continues to be the lowest cost rail operation in North America. The rail transportation of oil is a big growth area.

Industrial, which you want to avoid this time of year. Exposed to volatility. Wait for October.

Just came out with its results and were largely in line with what the market was looking for. Had been pretty well signalled that they had a difficult winter this year as well as a mild winter in 2012. As well, had a native Indian protest in Q1 which disrupted their line. He has a pair trade on with this on one side and shorting Canadian Pacific (CP-T) on the other. He is more negative on CP. Both of them are actually expensive. This rail is a good proxy for the Canadian economy and a good long-term holding. If looking for an entry point, he would hold off. You might be better looking at some of the US rails such as Kansas City Southern (KSU-N).

This is one you buy for capital gains. Has a much more reasonable multiple than what you would see with Canadian Pacific (CP-T). Likes that they are quite active in the transportation of oil. Oil tankers are growing at an amazing rate as the pipeline delays are putting pressure on oil prices in Alberta. He sees US and Canadian economies growing in the 1%-2% range. There is a lot more interest in transporting at cheaper rates.

This normally moves very strongly from around November each year to around this time of year. During the last couple of weeks, it has broken a short-term support level and established a downward trend. Starting to underperform the TSE Composite and is also trading below its 20 Day Moving Average. Now is the time to take some profits.

Transporting a growing amount of crude, currently about 150,000 barrels a day, which is expected to double to over 300,000 barrels per day. One of the largest rail operators in North America, operating 20,000 track miles and servicing all of Canada’s ports as well as Chicago and the Gulf of Mexico. Diversified right across various commodities. Higher margins than the rest of the rail competition. Yield of 1.75%.

(A Top Pick April 24/12. Up 26.32%.) The important heart of this rail is the location of their tracks, East and West in Canada and north and south in the US.

This has always been a better operator than Canadian Pacific (CP-T). He would say that both the Canadian rails are quite expensive. Some of the US rails are quite a bit cheaper than either of these. (See Top Picks.)

Valuations on both railroads frighten him. Would not hold onto them if he owned them. They are selling at levels that rely on major advances in the economy that he thinks are not realistic. In the long run he believes that pipelines are a safer way to transport oil and if there was ever a derailment and oil spill it would wreak havoc.

If you buy at this point, you have to be a long-term holder for 2-3 years. This is a play on the North American recovery and, to some extent, export markets. He likes it.

(Top Pick Mar 8/12, Up 36.97%)

CP has the activist shareholder thing going on and so has a premium. Surprised it has done so well. 3-6 months he seems more of a correction risk to the rails. Don’t run out and sell CNR, because the trends are good. If US gets downgraded this one will be hit.

The only thing he would say about the 2 Canadian rails is the Relative Strength Index is very high. Doesn’t mean that it can persist, but it is above 80 and it is coming back down, which is usually a sign of softening. If you are looking at this as a trade, you could buy it now but for longer-term holding, he would prefer getting it at $93.