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Ride the Canada Rails,Don't Short the Stocks - UBS

by: FP Trading Desk August 18, 2008 | about stocks: CNI / CP    

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UBS analyst Rick Paterson suggests in a note to clients that the recent commodities sell-off is one thesis that explains the recent pullback in rail stock. “Another is the idea that the rail stocks are the one remaining industrial group that hasn’t yet capitulated to the bear market...and their time is up.” He adds that “if enough people believe this it could become a self-fulfilling prophecy.”

Whatever the reasons for negativity on rail stocks, Mr. Paterson warns against investors shorting railway stocks, noting that the third and fourth quarters look strong “based on continued pricing strength and failing fuel expense in the face of a peaking fuel surcharge.” He notes that while there has been recent interest from investors in shorting rail stocks, his advice is “don’t do it.”

Mr. Paterson has outperform recommendations on Canadian Pacific Railway Ltd. (CP), with a target price of C$80, representing a 26% upside to where the stock is currently trading. Likewise, he recommends Canadian National Railway Co. (CNI), with a target price of C$61.  That’s 13% higher than where the stock is at now.

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This article has 1 comment:

  •  
    Aug 22 12:49 PM
    Guess I have enough of this RR to endorse it and point out what a great route structure it has along with cargo(s) and seaports along with high efficiency.

    Just wish they would run some pipelines in parallel. It may come with Kittemat and the oil port.
    Reply
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