It goes without saying that I favor the rails. And why not? The rails will play an important role in both containerized and commodity transport, moving forward, with a cost advantage over trucking, particularly if oil prices remain elevated. Hence, I'm Reiterating my Buy rating for Canadian National Railway (NYSE: CNI), first recommended on July 30, 2009 at a price of $47.95.
CNI's long-term valuation story remains intact: look for 5-8% revenue growth in FY2010, as both goods shipment and commodity transport recover; margins will likely increase next year, as well.
Another positive: CNI is an efficient railroad, with strong cost controls. The First Call FY2009/FY2010 EPS estimates for CNI are $2.95 to $3.51.
Technically, Canadian National's stock chart is strong – an uptrend, and the stock has recently pushed trough psychologically-significant resistance at $50. View any pull-backs as a Buy opportunity.
Stock Analysis: Canadian National Railway is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in CNI now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your CNI position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $23.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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