Canadian Pacific Rail (CP.TO)

Closed at $210, and he has a model price of $238. When it pulled back to $189, that was a good price. He would love this to come back to $149. This is not too expensive. When it does rally, it will probably rally up to $238 or $237. For fresh capital, there is more and better ideas out there.

Has been the most successful rail stock in the last 5 years. His pick has been Canadian National (CNR-T), but rail stocks are GDP growth plus 2%-3%. They have their cost ratio way down. You will do very well on a longer-term view, but if we do have a slowdown in North America, rail stocks are not going to be immune.

Feels this is better value than Canadian National (CNR-T). The management team is very, very good. They do an excellent job in fixing the business. Intermodal is an area of long-term growth in terms of pricing and volume, and he likes the business model. They have pricing power and an excellent network. They are very good at allocating capital. Dividend yield of about 1.2%.

This wants to trade at $228. His model price valuation is at $220. He sees a $25 upside that could happen at any time. If you are a trader, that is a potential. From a fundamental point of long-term view, if it got back to $143.74, that would be a great opportunity. He is not that high on it, but there is a possible trade coming up on it.

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.

(Market Call Minute.) Rails are a great business, and this one has corrected a bit. Would prefer something like Union Pacific (UNP-N) or Canadian National (CNR-T).

He is looking to pick up both Canadian National (CNR-T) and this one. The chart shows a long upward trend from early 2016, and has just started breaking down through the trend line. It is right at the 200-day moving average and there is a lot of resistance there. If we get the procyclical move that he is expecting, then rails should be part of that.

He likes the rails and is a really great sector to be in. They’ve consolidated over the last 15-20 years and he can’t see much more consolidation. It’s much more environmentally friendly than trucking. There are better margins because of the technology they’ve put in. If there is a decent pickup in commodities over the next little while, these companies will do very, very well.

Rails have done well. His model price on this is $232, an 8% premium to the existing price. A year from now, with earnings estimates, it is actually $275. A good holding.

This rail has more exposure to bulk commodities. If there is more movement of bulk commodities such as potash and grain, that will benefit them. He is comfortable owning this.

Great company. One of 6 major rails in North America. From a long-term perspective, they are all great holdings. This had a fantastic run from 2011 to 2015. It is still in a consolidation phase. The entire rail space is pricey from his perspective, and he has a hard time finding anything to buy in the sector. This would be a Hold to a Weak Sell. On pullbacks, these are very interesting stocks.

It is a strategic asset. There is a duopoly in the rail space in Canada and this is the leader. They have a pretty well entrenched management team. They can drive some significant improvement in their operating ratios. The valuation is on the rich side so he would take profits.

(Top Pick Feb 6/17, Up 2%) He got out. There was a bit of a lid and he sold at that point. He’d take it out if you made a bit of money on it.

(Top Pick Mar 31/16, Up 14%) It was cheap relative to the group and still is. He models 12% EPS growth. You can still own this. He prefers this to CNR-T because it has a better valuation and is more commodities focused.

CP-T vs. CSX-N. [Caller already had CNR-T] One railroad is enough to own. CSX-Q has already moved since Hunter Harrison moved companies. Just hold on to CNR-T.