Canadian National R.R. (CNR.TO)

Economic indicator. As the economy weakens, particularly in Canada, stocks come down. Stocks are forward looking, so this is a view of the next 12-24 months. Can be a core holding. May drift lower. Around $160 a good place to start accumulating; won't shoot up, so you can take your time. Over time, most likely will continue to appreciate.

Shares weak recently, but shipment volumes should rise as inflation eases. Labour negotiations right now. Leading indicator of the economy, and management seeing economic improvements. Strong fundamentals, profitability good, strong balance sheet. He'd buy more on weakness. Nice dividend yield of 2%.

Enjoys an oligopoly, but prefers CP which has a better footprint though you pay a higher multiple, which its growth justifies. Long term, CP will be a bigger winner. CN remains a fine business.

Likes the rail industry, essentially an oligopoly, can't replicate rail infrastructure. A "soft" cyclical -- pricing power, transports diverse goods. Even though economy is slowing, they carry necessary goods, so OK as long as not an outright recession. You can hold rails through the cycle. She's been adding.

NR’s total debt/equity is 100%, which means, CNR has one dollar of debt for every dollar of equity. We don’t think this leverage level is excessive given the stability and cash flow of the business. Also, we think net debt/EBITDA is a better metric to evaluate companies that generate consistent cash flow over the years, CNR’s net debt/EBITDA is 2.2x, moderately leveraged compared to CP and UNP of 3.2x and 2.7x, respectively. We are still very comfortable with CNR’s overall debt level.
Unlock Premium - Try 5i Free

Rails are always good, but you need to buy them at the right time. Q1 was weak, sold off. Maintained guidance for 2024. On price to growth, trades at almost 2, with 11% growth. You could buy it lower. Hands down, buy CP now instead.

Rails in NA are an oligopoly. CP acquisition of Kansas City Southern is probably the last one we'll see in NA. Can't really go wrong with either. CNR valuation is more appealing. Industry has lots of tailwinds. 

A bit soft recently on the back of earnings. Not building any more rails, cheapest way to transport lots of stuff including commodities. Likes it. Would add here. Rates have been fairly strong. Almost at full capacity.

Both CNR and CP are core holdings for him. He "likes his children equally", though for different reasons.

Unfortunate timing that it fell $10 after earnings yesterday. Look at rails to see how economy's doing, as they're a leading indicator. Yesterday's earnings were fairly solid, management reaffirmed 2024 outlook of continuing to see expected improvements in economy. EPS growth expected at 10%, ROC 10-15%.

Strong fundamentals, high profitability, good balance sheet. Slightly higher multiple than market, but it's of higher quality than the market. Buy here on the pullback.

He buys and holds structural growth companies for a long time. They've bought back shares for 20 years and keep raising the dividend. It's a toll service, really, as they move goods. Share have been rangebound for a few years, but levels now look good. He's owned this for a long time and it's been a great performer. Trades at 22x forward PE, reflecting their earnings. With this, he'd make an exception and buy it at all-time highs.

She likes the railways but doesn't own them since they are economically sensitive. If choosing between them she would pick CN since historically it has a better management team and a better dividend - 2% as opposed to CP's 0.7%. Also CP is still digesting its large Kansas City acquisition.

He owns both. CP is the only one through Mexico-US-Canada.

Duopoly in Canada. Not building any more rails. Remains the cheapest mode of transportation for certain types of goods. Different, but both will do well.

Had the advantage in early days, with all kinds of government money spent on it. If he had to choose today, he'd pick CP. CP seems to have an expansive view with KSU takeover, more aggressive growth strategy, better growth possibilities.

Top railway pick. Has been a long term investor in the company. Would recommend buying on recent share price weakness. Assets are very valuable given ability to build new rail lines. Pricing is inflation protected. 

The rails trade in tandem. With CP buying Kansas City, CP now competes head-to-head with CNR which used to have more of a north-south network. He isn't jumping into these stocks, because of a possible recession later this year. If you're a long, long-term holder, holding rails isn't bad, but he wouldn't but them now.