Thursday 24 July 2014
Invest in trains (the real thing, not the models)
Canadian Railways have always been a very solid investment. No one has ever gone broke investing in Canadian railways. They also pay quarterly dividends. Thanks to the vastness of our nation, their future is secure. Both CN and CP have the advantage of having ports on both ends of the continent, plus connections to Chicago and one major U.S. port each. Shipping by rail is still the cheapest and most efficient form of land transportation. Intermodal shipping, agricultural and resource agricultural exports guarantee their prosperity.
Especially resource.
Oil, that is.
Black gold.
Alberta tea.
As long as future pipeline development will continue to at a snail's pace, oil will continue to be brought to market by rail for a very long time.
Look at any freight train that passes you buy. How many tankers do you see? Can you count them all? Of course you can't.
CN stocks split in the previous decade, nearly tripled in value, then split again late last year. Pundits estimated that the price would climb to $66.00 by the year's end. As of this writing, the stock is listed at over $73.00. CN's second quarter profits increased by 18%.
The largest single shareholder of CN stocks is Bill Gates. Yes, that Bill Gates. The Microsoft guy.
In 2002, CP broke itself up into five different companies. CP Rail soon exceeded its pre-breakup value, and two of the companies, Fording (now Teck Resources) and Encana have become valued resource stocks. Encana also split into two companies, creating Cenovus, creating more shareholder value.
In 2012, CP Rail underwent a much publicized corporate takeover and management restructuring, where former CN CEO Hunter Harrison was hired to run the railway. Before the takeover, the stock was languishing in the mid 60's. As of this writing, it's now worth over $210. Shares have surged over 25% in 2014. Under Harrison, CP's operating ratio has fallen from 80% to 65.1%.
Will these stocks continue to go up? Hard to say, but keep in mind that we're still in a very strong bull market.
But your own homework before you invest. There's plenty of advice and information out there. You're not going to impress your financial advisor if you tell him that you're going to sink your hard earned cash in a stock just because you read about it on the WMRC blog!
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