Stock of the Week: Canadian National Railway

Take some time to appreciate 20 years of outperformance

Andrew Willis 22 February, 2021 | 4:28AM

 

 

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Andrew Willis: CN Railways occupies a special place in Canadian history and has set a historical standard of excellence for financial and operating performance – in fact, it’s the best performing stock in our coverage universe over a 20-year time frame! More recently, throughout COVID, trains were essential and steamed along with needed supplies – but you wouldn’t know it if you saw the stock price! Shouldn’t such an important business be making more money?

Well, yes and no. Toilet paper and other household staples were packing shipping containers, but other big-ticket items like automobiles stayed put. Equity analyst Matthew Young also noted weakness in coal and crude-by-rail shipments due to weakness in demand.

A slow year has us keeping this stock trading around two-star territory, but when it comes to steady business, this company could be king. Not only did trains still run, but during these quiet times, wide-moat CN Rail continued with heavy network investments and increased usage of newer more-efficient and safer train configurations.

And CN Rail’s reliability is nothing new… Looking back twenty years we see market-beating returns around 15% annualized and around 12% for the last 15-year period.

In economic downturns, the company experiences the cost - and privilege ­-of operating an essential business. But investors should focus on how well it brings back prosperity from coast-to-coast.


For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canadian National Railway Co148.67 CAD1.03

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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