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Last chance to board the Canadian National Railway (CNI), which I first wrote about on July 30, 2009 at a price of $47.95.As noted last year, the rails will play a pivotal role in both containerized and commodity transport, moving forward, with a cost advantage over trucking, particularly if oil prices remain elevated. And with oil trading at about $85 per barrel and trending toward $90, oil's price qualifies as elevated, no question.
Hence, look for Canadian National's 2010 revenue to jump 8-11%, as both goods shipment and commodity transport recover; margins will likely increase this year, as well.
Also, signs of growth in fertilizer and coal use provide additional evidence that the global economic recovery is strengthening. Another positive: CNI is an efficient railroad, with strong cost controls.
The risks with CNI? The railroad sector's transport advantage versus trucks erodes as oil's price retreats: but don't look for a substantial oil price moderation any time soon.
The First Call FY2010/FY2011 EPS estimates for CNI are $3.61 to $4.25. Each EPS estimate looks about 5% low, according to my analysis.
Technically, Canadian National's stock chart is strong -- an uptrend, but it's slightly overbought, short-term, after breaking through psychological resistance at $60. Hence, it's best to wait for a $1-3 pull-back to purchase shares.
2010 Outlook: I view Canadian National as a long-term play, but if investors are looking to sell CNI within the year, it's probably best to take your profits after it rises to $68-69, if it fails to rise above $70.
Stock Analysis: I consider Canadian National Railway to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% 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, I wouldn't buy more than 75% of my CNI position before June 2010 and I'd put a sell/stop loss at: $23.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Also, signs of growth in fertilizer and coal use provide additional evidence that the global economic recovery is strengthening. Another positive: CNI is an efficient railroad, with strong cost controls.
The risks with CNI? The railroad sector's transport advantage versus trucks erodes as oil's price retreats: but don't look for a substantial oil price moderation any time soon.
The First Call FY2010/FY2011 EPS estimates for CNI are $3.61 to $4.25. Each EPS estimate looks about 5% low, according to my analysis.
Technically, Canadian National's stock chart is strong -- an uptrend, but it's slightly overbought, short-term, after breaking through psychological resistance at $60. Hence, it's best to wait for a $1-3 pull-back to purchase shares.
2010 Outlook: I view Canadian National as a long-term play, but if investors are looking to sell CNI within the year, it's probably best to take your profits after it rises to $68-69, if it fails to rise above $70.
Stock Analysis: I consider Canadian National Railway to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% 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, I wouldn't buy more than 75% of my CNI position before June 2010 and I'd put a sell/stop loss at: $23.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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