Canadian National R.R. (CNR.TO)

You may get a little pop in this, but the problem is that it has reached a little beyond its intrinsic value. It is having a very hard time going anywhere at this juncture. He would be more on the side of trading out, looking for a bottom of around $75, rather than owning it.

This is really predicated on economic growth. There are 2 facets to their model. One is price increases and the other is volume increases. They have been able to pass on price increases fairly consistently. On the volume side, it is economic growth. A very well-run rail with a low operating ratio.

His preferred choice in rails, and his biggest investment in that sector. They have a tendency to outperform their guidance, and thinks they will do it again this year. Very strong cash flow growth. Good operating ratio performance. Because of the free cash flow growth, the dividend keeps constantly being increased.

Growth stock for a dividend investor? This would be a high-quality growth stock. A very strong operator and obviously benefits from an improving economy and improving trade. It has a record of an increasing its dividends. This is the best operator of all the rails.

An outstanding rail. Very well-run with a deep management bench. An excellent franchise in terms of where they touch on the coast. However, it is all about what you pay for a business. This is not cheap. There are other rails that are better value such as CSX Corp (CSX-Q), where expectations are not as high. They’ve had certain service issues and Hunter Harrison will truly enact the plan he has laid out and issues will be resolved. Dividend yield of 1.7%.

The stock has moved up, but is now looking like it is breaking the upward trend line. It is most definitely consolidating. It could consolidate for a while and then move up again. That is not a bad thing, but you have to be a patient person during that period.

If Canada is going to do well, and we are going to have a back half pick up like everyone thinks, why not own this. The recent pullback represents a buying opportunity. Dividend yield of 1.6%. (Analysts’ price target is $109.70.)

(Top Pick Oct 28/16, Up 18.51%) The rails that have done well and are no longer cheap. The trend line is not broken, but it sure needs to hold in. If planned pipelines are not built we may get a lot of crude by rail.

Covered Call. A stock he thinks would benefit if the Canadian economy continues to do well. The Canadian economy is in pretty good shape and this company is representative of that. There was a downturn recently in the stock price, and this is a good entry point. He would look at an “at the money” covered call on this. Dividend yield of 1.6%.

It is a long term core holding. It has come off a bit recently after a huge run. At current prices it is fully valued. He wants to buy it in the low $90s or high $80s. They increased their dividend 10% plus for the last 5 years. He prefers this to CP’s dividend record. He also likes that it is more North/South. It is more US oriented.

Has owned and holded since 1997. CNR has advantages in North America. They are North/South as well as East/West. They can transport goods from Winnipeg to Mexico City. Their acquisition allows them to get around Chicago quickly. They own a quarter of the container port in Prince Rupert BC, which is a day closer to Hong Kong than other coastal ports. Premier rail company in Canada and North America. They don’t just transport grain, they transport all sorts of products.

It is the best run railway in North America. They need increasing volumes in products and commodities to move. They have a big exposure to cross boarder business and not so much to commodities. Hopefully NAFTA stays as it is. The dry weather out West could be bad for them. Buy as they sell off.

(Market Call Minute) Get it under $100 if you can buy. It is a nice offset if you own pipelines.

Canadian National (CNR-T) and Canadian Pacific (CP-T). These have both lagged relative to the market. The market tends to allocate cash toward certain areas and groups at the expense of others. He thinks it is more of a function of what is going on. Overall, the valuation is not super compelling. If it is a long-term call you are looking for, he would just buy them and put them away.

This has pulled back. The grain crop in Western Canada has been light. Growth rates have been good for the last couple of years, so people have been working for them to slow down. On a long-term basis, it has been a wonderful company to own. They still have the ability to move forward and grow with the economy, and gradually take market share away from trucking, etc.