Canadian Pacific Rail (CP.TO)

There is a lot of good news in the stock. There is a turn-around team in there. The price of the stock gives the team all the benefits of the turn-around.

Selling at a multiple premium over Canadian National (CNR-T), which has a proven track record. If you have only just bought it, he would suggest taking your profits and run. Has moved very rapidly and has got some proving to do over the next couple of years.

Positive elements going on in the rail sector. More demand from oil/gas companies because of the shortage of pipeline capacity. At these levels, some of the good news is baked into the price. If you own and you have done very well, you might want to consider taking half of your money off the table.

Sold his holdings last fall because of all the excitement surrounding the stock. Moved his money into Canadian National (CNR-T). Feels there are a lot of people in this stock who are not necessarily investors and there is a lot of momentum trading. Over a long time period this company will do just fine. Trading at 27X earnings.

Recommending because of the new management that has taken charge. They are continuing cost stripping in operating and efficiency model.

Remarkable how much faith people have put into the new management. Stock is up 40%. He is a little worried that people have gotten over enthusiastic about the turnaround story. It’s not that easy to change it overnight.

People were very excited when the former manager of Canadian National (CNR-T) who did such a good job in controlling costs, became the new CEO. This is why the share price has gone up. Probably most of the good news is in the price. If you own, you might want to take some of the profits.

Trading at a very rich valuation of 16X forward. Between now and 2015, their EPS can grow annually by 24.5% per year, which is way stronger than any of their peers. Operating ratio is 74.1% and he sees it falling to 68% by 2015. There are 2 risks. 1) If the economy falls apart but they are mitigating with railing crude, etc. 2) If the shippers get their way to get more control over the schedules of the rails, that could be an efficiency game changer for both this and Canadian National (CNR-T). Would like to see it at around $90.

Expectations are mind-boggling to him. This one also ships coal so he doesn’t know what the market is thinking. Thinks it will take a lot of time. In his opinion, there is no margin of safety and all the good news is already priced in.

Is already discounting much of the improvements they hope to implement with the new management. Thinks it is overvalued and sold it a while ago. If CN pulled back he would buy that.

The “Harrison” factor has done extremely well for the stock. Coal shipments have been very, very small. He likes the rails right here but is a little more partial to Canadian National (CNR-T) because of this companies big move higher.

Thinks the stock price is sustainable given the manoeuvres that were conducted to put in the new management. Has done very well, very speedily but is commodity dependent. If you own, you could take some profits but he would stay in for part of it.

(Market Call Minute.) This is about as high as you should see on this stock.

Caller is thinking of selling and replacing with a US rail. He is in tune with this thinking as this company has had an enormous run and is now valued more highly on an earnings basis than any other North American railway. He likes CSX (CSX-N) which is one of the large container moving railways on the eastern seaboard of the US. Do a lot of inter-modal. They also run coal from Wyoming to the east which has not been such a great business this winter so the stock has been sold off. You can get it at a reasonable price.

Took down his numbers ever so slightly on the rails today. Still very good 3^rd quarter growth at about 8% year-over-year. Starting to be very impressed with this company’s ability to lower its operating ratios and he thinks this is going to help them generate 22% EPS compounded annual growth rate over the next 3 years. Look for weakness to accumulate.