Canadian National R.R. (CNR.TO)

Likes the shipment of oil by rail and doesn’t think that what happened in Québec is going to affect shipments at all. Has significant trackage in the US. Good operator. PE of 17.25%. Yield of 1.65%.

Certainly not nearly as overvalued as Canadian Pacific (CP-T). If he were to choose between the 2, it would certainly be CN. More and more oil transportation has been a boon for both companies. At 15X next year’s earnings, it is not dirt cheap. You are not going to get a lot of multiple expansion but you could still get some earnings growth out into next year as well.

Sensitive to the US economy because of its Illinois Central holdings. Likes the prospects for the US economy. Sees growth in traffic and they are going to be a major beneficiary. Dividend yield of 1.71%.

Likes the rails a lot, especially this one. Had a very difficult last quarter because of weather issues. Had a bit of a pull back so now is a good time to buy.

Canadian Pacific (CP-T) versus Canadian National (CNR-T)? Just sold the last of his positions and would like to get back in when it gets back to the trend line in the low to mid $90’s. This would be his preference because it is less overvalued.

(A Top Pick June 11/12. Up 20.46%.) Continues to be the lowest cost rail operation in North America. The rail transportation of oil is a big growth area.

Industrial, which you want to avoid this time of year. Exposed to volatility. Wait for October.

Just came out with its results and were largely in line with what the market was looking for. Had been pretty well signalled that they had a difficult winter this year as well as a mild winter in 2012. As well, had a native Indian protest in Q1 which disrupted their line. He has a pair trade on with this on one side and shorting Canadian Pacific (CP-T) on the other. He is more negative on CP. Both of them are actually expensive. This rail is a good proxy for the Canadian economy and a good long-term holding. If looking for an entry point, he would hold off. You might be better looking at some of the US rails such as Kansas City Southern (KSU-N).

This is one you buy for capital gains. Has a much more reasonable multiple than what you would see with Canadian Pacific (CP-T). Likes that they are quite active in the transportation of oil. Oil tankers are growing at an amazing rate as the pipeline delays are putting pressure on oil prices in Alberta. He sees US and Canadian economies growing in the 1%-2% range. There is a lot more interest in transporting at cheaper rates.

This normally moves very strongly from around November each year to around this time of year. During the last couple of weeks, it has broken a short-term support level and established a downward trend. Starting to underperform the TSE Composite and is also trading below its 20 Day Moving Average. Now is the time to take some profits.

Transporting a growing amount of crude, currently about 150,000 barrels a day, which is expected to double to over 300,000 barrels per day. One of the largest rail operators in North America, operating 20,000 track miles and servicing all of Canada’s ports as well as Chicago and the Gulf of Mexico. Diversified right across various commodities. Higher margins than the rest of the rail competition. Yield of 1.75%.

(A Top Pick April 24/12. Up 26.32%.) The important heart of this rail is the location of their tracks, East and West in Canada and north and south in the US.

This has always been a better operator than Canadian Pacific (CP-T). He would say that both the Canadian rails are quite expensive. Some of the US rails are quite a bit cheaper than either of these. (See Top Picks.)

Valuations on both railroads frighten him. Would not hold onto them if he owned them. They are selling at levels that rely on major advances in the economy that he thinks are not realistic. In the long run he believes that pipelines are a safer way to transport oil and if there was ever a derailment and oil spill it would wreak havoc.

If you buy at this point, you have to be a long-term holder for 2-3 years. This is a play on the North American recovery and, to some extent, export markets. He likes it.