Canadian National R.R. (CNR.TO)

(A Top Pick June 4/15. Up 6.79%.) The whole story for this and Canadian Pacific (CP-T) was the margin expansion and the revenue drivers that were going in the right direction. All of that has gone the other way. All the drivers that have been driving this down, are actually turning it around.

Has owned this since 1997. Gives you dividend growth roughly in the 20% range per year. The lowest cost rail in North America, because they have both east-west and north south connections, from Winnipeg to Mexico City and coast-to-coast. They also own 25% of the container port in Prince Rupert.

Great company. The rails have been tough recently. He recently exited CSX rail. CNR-T is in much better shape. He would continue to hold it, but you have to be patient. Start to buy for the long term.

(A Top Pick Aug 18/15. Up 0.53%.) Bought this at $80, and wrote an $80 Call reducing the price to $77.11, that was the net cost. If you had bought this without writing the Call you would be down 2.5%-3%. By doing it this way he is up a little bit and still owns the stock and collected the dividends in the process.

If you believe in the North American economy, which he does, rails are a great way to play it. Prefers this over Canadian Pacific (CP-T) although there is nothing wrong with CP. This has been the cream of the crop in terms of performance, which will continue going forward.

(Market Call Minute) These guys are little ahead of the curve. The rails are just too cheap relative to their 5 year average.

(A Top Pick May 1/15. Down 0.02%.) Just had a big drop on Tuesday. Has started to rebound, and from now on they will be there. Thinks it will go back into the low $80s.

They cut their outlook, which is unusual in a sense, because going into the quarter it was a fairly low estimate in terms of the bar they had to go over. Numbers were not too bad from a volume perspective. He would have thought it would have been a little more bullish as they are a company that are relying on the consumer and less relying on the bulk, where Canadian Pacific (CP-T) tends to be.

Rails have acted a lot like the resource sector. It is kind of range bound and he would like to see it get above its high of $83-$84. It will go, so long as the resources go, and financials to a certain degree.

CP-T vs. CNR-T. CP-T’s model price is $191.20, bang on its market price. CNR-T is cheaper, model price is $101.80, or a 25% upside. Buy CNR-T at $72.65.

Has an analyst friend that recommends a Pair trade going Long on this and Shorting Canadian Pacific (CP-T), and he is going to defer to him that this rail looks good.

Has been one of the greatest Canadian success stories on dividend growth. Also, has terrific free cash flow every year. They continue to have record profits. Prefers CSX Corp (CSX-Q) because of possible consolidations in the US railroads.

It is his favourite railway in North America. It is the best run and most profitable. It has less resource exposure than other railways. They have a great north/south presence and they solved their ‘Chicago’ problem. The dividend is not high, but it grows regularly.

Seems to run into resistance around the $79-$80 level. It is now back challenging that level again, and at the same time the US economy is perking along. There seems to be lots of business for the railroads. He would like to see it break out, and if it does, it could be $85-$90 or higher.

Canadian Pacific (CP-T) or Canadian National (CNR-T) and oil? All of the excitement on Canadian Pacific was crude by rail which was where a lot of their growth came from. Multiples got hit pretty hard when oil came off, and they had to back away from that part of their growth. This one was hit as well. Both benefit from being widely diversified and both have great operating ratios. If oil turned around, he would expect that both would participate, but CP a little more so.