Canadian Pacific Rail (CP.TO)

CP vs. CNR Owns CNR. Numbers positive over the last little while, but the KSU acquisition may hamper them going into next year, with the stock moving sideways. Rail industry as a whole is great: limited competition, hard to duplicate, good pricing power, sweet spot of transportation. KSU acquisition will enhance CNR's business. Forest fires are affecting the backlog, but this is short term.

Good time to own all the rails. Supply chain bottlenecks. Developed world is flush with cash, and they're buying stuff. Trades at 23x earnings, on par with peers. Consolation prize from the KSU failed deal, which could come back to shareholders. Good, steady double-digit or high single-digit growth.

Rails are oligopolies, just like pipelines. Rail is the cheapest way to ship a lot of goods. They'll remain solidly profitable. He has no worries about the CN acquisition.

Not the time to buy. It got outmaneuvered with the KSU deal. He's not worried they'll struggle without KSU. He's worried they'll go and do something that makes less sense only to prove that the acquisition path is the right way forward. Wait for 4-6 months. He prefers CN.

Will benefit from the recovery. High barriers to entry. Trading at 18x, the higher end of a 10-year valuation range. More expensive than CNR. First wants to see the outcome of the bidding war for KSU. CP seems to be the best fit, but it's up to KSU.

Share declines are due to its bid for Kansas City Southern. Rating agencies have downgraded CP because CP will take on debt to buy KCS. However, CN has offered a higher bid that KCS prefers. CP's valuation is now more attractive than its American peers. Whether CP wins KCS are not, CP will benefit from the reopening.

Better suited to do the KSU deal than CN. Great things about rail are high barriers to entry, good pricing power, limited by rational competition, good volume growth means better margins and cashflow. Great industry to be in. KSU deal may take a long time, but will help the winner's bottom line. He owns CN instead.

CN vs. CP The transports are close to their highs as volumes are hitting historic highs. He can't choose one over the other until the Kansas City Southern deal is complete. Who will win? IF you hold a position in either, just hold and wait. If you don't own at all, then maybe buy a small position in both. Then after the deal, trim the loser and increase the winner.

CP-T and CNR-T bid on KSU-N. The bidding war for KSU-N. CP-T and CNR-T are locked into a bidding war. CP-T shareholders want CP-T to push this a bit so they can get it. He does not think CNR-T shareholders are as much in favor of the bid. He does not have a horse in the race, but he thinks CP-T will raise their bid a little. CP-T would benefit more with this US exposure, but CNR-T might have more pure synergies. He is watching it play out from the sidelines.

CP rail still moves a fair bit of thermal coal, which is decreasing. CNR gets more of its revenue from metallurgical coal, which is increasing. Both provide only a small portion of revenues. They also move chemicals, lumber, autos. If you're betting on worldwide economic recovery for many years, as he is, you have to own the railroads. He's a bit nervous about the acquisition of KCS, but if that goes through, could be terrific. Incredible performers over the long term, and no reason this will stop. He owns CNR, but would have no problem holding CP. Keep holding.

They just bought KSU, which will make CP more competitive with CNR. Overall, a good deal. However, he's worried about the valuations of CP and KSU, pushed up by bond yields moving up currently. He's cautious. He owns no rails, but prefers CN long term. He think investors are paying too much for CP. Watch for a better opportunity in the next 1-2 years. CP could see a shakeout in its valuation given sky-high expectations with this deal.