Canadian National R.R. (CNR.TO)

CN (CNR-T) versus CP (CP-T). He would love to see CNR-T to pullback to $83 and has a model price of $120. He has a model price on CP-T of $261. There is more upside potential on CNR-T.

A core holding. Dividend grower, increasing 10% this year. It has had its challenges, but the good news is their volume growth exceeded expectations. They have congestion problems in the west and the U.S. They're spending a lot of money with 60 new locomotives and 300 more train crews. Will right itself in the second half of 2018. Earnings YOY may be flat, but should rise 10% next year. There's more to the story in the recent CEO change. Maybe he was an interim CEO all long. (Analysts' price target is $105.61.)

It went sideways in 2017. There was almost no reaction today to a change in the CEO. It is not an expensive stock right now. You could buy closer to the recent lows.

He agrees with a viewer’s comment that this is part of the backbone of the Canadian economy. The rails are great to own long-term. However, NAFTA changes could interfere with CN, which is very big in the intermodal business. It fills a lot of boxcars that it transports across Canada and through the United States, and to Mexico. CN is also having trouble servicing all of the new capacity that it took on last year. He prefers CN to CP. Increasing pipeline capacity will not harm CN by taking oil-transportation business away from CN, because CN is so busy that it can’t currently take advantage of the opportunity to carry lots more oil, so when that opportunity declines, there won’t be much business lost. He added to his CN position a month ago.

Canadian National (CNR-T) vs Canadial Pacific (CP-T). He owns CNR-T and thinks CP is more commodity based (grains and agriculture and lumber). CNR-T moves more goods. Oil companies are careful to over committing to rail, because it is more expensive to ship than by pipe. Buy CP if you thing more commodity shipments will occur. Buy CN if you think more inter-modal goods will be shipped.

Neutral. Earnings are pretty good, but the commodities business is skaky. If NAFTA goes down, what happens to cross-border traffic? Too uncertain.

They are going to be shipping more goods in the future. Kind of a cyclical business. This should be a core holding in a portfolio if you own it. He would be all over it if it fell to $90.

He watches all the rail stocks. It has struggled. They came out and said that business is good but weather is bad and they will have near term hiccups. At $90 you would have taken the risk out.

The industry had many years that were terrible but then companies were bought and it has been rationalized. Good opportunity. Good pricing power. Good capacity on the oil side as he sees more oil being moved by rail particularly in Canada. It is a play on global growth as rail is efficient. It has underperformed CP lately and thinks it is going to catch up (Analysts' price target is $ 106.75).

His long-term view on this is positive, having owned the stock since 1997. The economy is going to drive this company, so it depends on which way the economy goes. They were a little short on their earnings in the last quarter because they spent some money on locomotives. Somebody has to move the products regardless of what happens to NAFTA. This is the kind of stock you want to put in your portfolio.

Just came out with their Q4. Revenue was in line but their costs were higher than expected, and the stock sold off. CapX got a little higher than expected as well. This still trades at a 1 point premium to Canadian Pacific and the rest of its peers. However, this is the prize in the rail space, and he models an easy 10% EPS over the next 5 years. He would buy this on the current dip.

It is the north to south rail. The rails benefit from lower US tax rates but NAFTA is a risk. It is at the upper end of its range, as is CP-T. CNR-T is discounting these things. It would be a buy under $100.

Railways are strong moat type companies, having a strong competitive advantage because of having tracks. The competition is relatively small. He likes this company a lot. They are going to be exposed to the business cycle just like any other cyclical type of company. Feels this is better run than Canadian Pacific (CP-T). Their ROE and growth metrics are better.

He is a bit concerned with NAFTA on this. On any weakness on NAFTA, he would continue to peck away at owning this company.

(Market Call Minute.) A cyclical, but ironically enough. Very consistent performance record of beating the TSX in down markets, so it is sort of an all-weather stock.