Canadian National R.R. (CNR-T)

CP has been getting all the attention because it merged with Kansas City Southern, but CN trades at the better PE of 20.28x compared to its rival of 27.96x. No question that CP is a powerhouse, but it will take time to absorb KC into its operations and pay for it. Both companies enjoy a duopoly in Canada, so the moat is high. Read 3 All Canadian for our full analysis.

Defensive industrial. Despite Canada perhaps already being in a recession, can still grow EPS. Company anticipates 10-15% earnings growth 2024-2026. Increased productivity of network. Continued dividend increases. Yield is 1.96%.

Valuations are similar. CNR 200-day MA roughly sideways, the stock price is above that, average type of returns. CP's chart is fairly similar, but trending upwards a bit more. CP looks slightly better on technicals, so that's his choice.

Rail business in Canada is wonderful, much of it due to barriers to entry. Its transportation can't be outsourced the way manufacturing can. CP acquisition has given it a more impressive footprint than CNR. But CNR has a more attractive multiple, so he's buying for clients. Both are good, high quality companies.

Blue chip. Rails are the most efficient and environmentally friendly way to move goods around the country. A train can move 1 ton of goods on 1 gallon of diesel fuel, replacing 280 transport trucks. Economic moat. Strong ROE, well above market average. Balance sheet quite strong. Capital appreciation expected. Yield is 1.99%.

Just reported a strong year to date, but their forecast is murky. There's no more opportunity to build rails. He likes CN, because CN runs east-west, as well as through the Chicago hub, Union Pacific and GMTX to access Mexico. So, they've covered North America. But it now and dollar-cost average over time.

He'd do that trade, especially because in your RRIF there won't be tax consequences. Gives your portfolio more diversification. CP has more growth potential now with its wide network. Debt for KSU takeover is manageable, and they'll get cost savings. CP is at a cheaper multiple.

The question was on whether he prefers CN or CP. It looks like CP will close its acquisition of Kansas City Railway. It will be a great asset but the costs will affect the balance sheet a bit. He likes CN: CP has had better management over time but activist pressure is forcing CN to make big changes. They are buying back stock and increasing dividends which is good for the long term.

The question was on both CN and CP He owns and likes both. Although they are economically sensitive, rail is the cheapest mode of transportation for a number of goods and they are well positioned. CP has entered into an agreement to acquire Kansas City Southern and would become the only railway with lines through all three of Canada, the U.S. and Mexico.

Likes all transportation. Loves the rails and these charts. Can't go wrong with the rails and their massive moat. Higher highs and lows. Reaccelerating here. Industrials are among his favourites. Definitely add right here, right now.

Good time to sell right now.
Has owned shares in the past. 
Does not own any shares now.

Tricky. In a pension fund, you want to have a rail because they're incredible businesses. Can you replicate this business? No. Extraordinary pricing power. CNR has done a great job squeezing everything it can out of its infrastructure. A few years ago, CP had slightly cleaner story in terms of future profitability. CP now has the full continent and more upside. 

It can raise prices since it is a major way of moving goods. It is being overly conservative in its predictions with very low guidance which comes after 25% earnings growth in 2022. It is one of the best success stories in Canada. It has raised its dividend for 27 years in a row. Could do $8 per share in earnings and be a $200 stock. This is therefore a good entry point.    Buy 10  Hold 22  Sell 3

Blue chip, class 1. Prefers it to CP because of the more extensive footprint of the track. The footprint gives it a natural competitive advantage. Valuation's more attractive, too, but shares have run up, so wait for a pullback. Can re-evaluate once CP acquires KSU.