Canadian National R.R. (CNR.TO)

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.

Canadian railroads have 15% compound returns going back 30 years. CP has done way better than CNR. Wishes he owned CP, and you probably should own both. Will see buybacks, dividend increases, growth at GDP+. Always cutting costs. Will see double-digit returns for a very long time. Nothing can displace railroads. Drones just can't move the heavy stuff.

Bullish because we'll see more onshoring. Hard to tell if we're going into recession or accelerating. Should see restocking of inventory. 

We like CNR, and the company operates in a duopoly market with CP. Although the rail industry may not grow too fast from here, the industry has tremendous staying power, and we expect CNR could continue to grow its dividends for decades.
Unlock Premium - Try 5i Free

Canada is in a recession that impact the rails who move goods. Volumes are way down and so are revenues. Bulk commodities like grain are still doing well, and this remains a core holding of his. Industrials do suffer in a wider slowdown, but less so in Canada because we have fewer industrials than in the US. And rails are less cyclical. CN outperforms the TSX usually when markets are weak. They reiterate guidance, and he expects a dividend hike. Management is in good hands.

Effectively has a similar network to CP's, through strategic contracts with other rail lines. Dividend has grown more significantly than CP's. Prefers CNR because it owns prime real estate around the choke point, Chicago, allowing it to get across the city faster than anyone. 

A bellwether for the economy, so price has suffered, but this is an opportunity to buy.

Owns shares in company. Would recommend buying. Assets valuable since not building anymore. Strong pricing power. Free cash flow very strong. Excellent capital allocation with share buybacks. 

It's in the public interest to get this pipeline going, as it will be great for Canadian energy producers as a whole. Won't have a negative impact on the rails. Rail is not the most efficient for shipping oil, it's the overflow option. He's positive on CNR and CP, more so on CP.

Great acquisition of Kansas City by CP was a game changer. CNR is the gold standard in North America. US is not in a recession yet, but if it does happen, all the rails will get cheaper. Don't settle for just a 1% differential from the historical average, when you might be able to get it 20% cheaper.

He also owns CP. Some sensitivity to volumes in an economic downturn. Historically, has outperformed the TSX during downturns. Long and strong this name. Wouldn't shy away from adding here, despite economic clouds.

Assets valuable - not building any more railroads.
Prefers CP Rail.
Buy on weakness.
Good for long term investors if willing to hold for long period of time. 

He owns and prefers CP, due to its recent acquisition. CNR has fallen more than CP, and this could be due to cyclical shipping volumes and some perceived weakness in the economy. Strong company. Could add on a material pullback.

Arteries in the Canadian economy. Any economic softness would appear in the rails before other businesses. Efficient, environmentally friendly. Natural, durable economic moat. 19x earnings, but a quality compounder. 22% ROE. Yield is 2%.

PE ratios are too close to call. Yield on CNR is about 2%, versus 1% for CP. No one's going to buy it for income. Looking at the FMV, the stock prices are so close for each, you really can't judge. 

Big difference is the book value. CP looks so cheap on price to book because of accounting decisions on its Kansas City purchase. So he can't tell if that's real or not. When he looks at CNR's SVA chart, it has an easy downside in weak markets to about $116. That's not trivial. 

Dead heat on a merry-go-round. Neither is reasonably attractive right now.